Investing Research Articles

…while of little value to traders, the industrial production (output) gap may have some meaningful predictive power for broad U.S. stock returns over relatively long periods.

…large speculators in commodity futures generally do make money by exploiting risk premiums derived from the theory of storage (and perhaps from momentum trading).

…the high correlation between equity yield and bond yield derives rationally from the tendency for inflation to be elevated during recessions, such that both equity and bond premiums are relatively high during recessions.

We occasionally select for retrospective review an all-time “best selling” research paper from the past few years from the General Financial Markets category of the Social Science Research Network (SSRN). Here we summarize the June 2007 paper entitled “The Fundamentals of Commodity Futures Returns” (download count over 2,500) by Gary Gorton, Fumio Hayashi and Geert… Keep Reading

…cash flow expectations represent a significant positively correlated component of stock returns at both firm and aggregate levels. Their importance grows with investment horizon, dominating discount rate expectations for horizons over three years.

…properly structured mutual fund redemption fees tend to protect long-term investors by penalizing frequent traders. Small redemption fees of long duration are optimal for long-term investors.

A reader inquired about the COTs Timer trading system, which employs information from the Commodity Futures Trading Commission’s (CFTC) combined futures and options Commitments of Traders (COT) reports to time the markets for associated assets. In describing these reports, COTs Timer states that: “Devoted fans say they may be the closest thing in the public… Keep Reading

…traders may be able to exploit predictable seasonal changes in implied volatility that derive from the effects of investor mood on perceived risk and not from variations in actual risk.

…individual active traders on average may be able to beat the market when collaborating on trading methods and opportunities.

Is there a predictable market reaction to stocks reaching round-number n-day highs and lows? In their November 2007 paper entitled “Highs and Lows: A Behavioral and Technical Analysis”, Bruce Mizrach and Susan Weerts investigate whether there are systematic trading behaviors for stocks posting 10-day, 25-day, 50-day, 100-day, 150-day, 200-day and 52-week highs and lows. Using… Keep Reading