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Investing Research Articles

3517 Research Articles

(Not) Capturing the Elusive Value Premium

…the bid-ask spread, transaction costs and the price impact of trading make the value premium in small-capitalization stocks hard to capture. The prey is generally too elusive for mutual funds and indexes.

No Reward for Risk?

…exceptionally volatile stocks are on average inferior investments, or at least trades. There is no reward for this kind of risk, and presently no explanation for this effect.

Last Nail in the Coffin of the Fed Model?

…practitioners who use the Fed Model are simpletons. The model is theoretically implausible and empirically challenged.

Classic Research: Mean Reversion in Corporate Profitability

…corporate profitability and earnings growth exhibit non-linear mean reversion.

Can Individual Investors Enhance Returns with Options?

…investing in options as a marginal enhancement to a buy-and-hold approach can improve returns and Sharpe ratios, but only if the options positions are small compared to overall portfolio size.

Classic Research: Explaining Large Stock Market Fluctuations

…the power law distribution of sizes of large investors, along with the optimal trading behavior of those investors, explains the excess volatility observed in asset markets.

A Few Notes on Probability Theory, The Logic of Science

“…[T]he human mind has a predilection for rampant, uncontrolled induction, and it requires much education to overcome this.”

A Few Notes on Reinventing The Bazaar, A Natural History of Markets

“The variables that economists have found to be associated with increases in per capita income, to sum up, fall under two headings: investment and institutions.”

Abnormal Returns from Small Stocks with Good Prospects

…hidden gems (unlike hidden lumps of coal) generally do not want to be hidden. The best small firms solicit analyst coverage to get investor attention.

Challenging the Value Premium

…the empirical foundation for value investing may not be as sound as generally thought.