November 10, 2004 - Equity Premium, Fundamental Valuation
In their June 2003 paper entitled “A General Theory of Stock Market Valuation and Return”, Christophe Faugere and Julian Van Erlach contend that past stock returns are overstated and develop a market valuation formula that out-fits the Fed Model. Specifically, they show that:
November 8, 2004 - Fundamental Valuation
…the gap between the S&P 500 earnings yield and Treasury instrument yields has some market timing value, with short spreads outperforming long spreads.
November 3, 2004 - Big Ideas
…stock market returns fluctuate away from, and revert to, a running mean on a roughly annual basis.
November 1, 2004 - Short Selling
…investors should avoid stocks with high short interest ratios.
October 30, 2004 - Animal Spirits
…individual investors systematically show attention-driven herd-like behaviors.
October 29, 2004 - Individual Investing
…a high level of trading activity usually underperforms.
October 27, 2004 - Sentiment Indicators
…just because there is a crowd of traders does not mean there is wisdom.
October 23, 2004 - Big Ideas
…Burton Malkiel continues to believe that the stock market is inexploitably efficient.
October 22, 2004 - Individual Investing
Could we make a bundle day trading? In their May 2004 paper entitled “Do Individual Day Traders Make Money? Evidence from Taiwan”, Brad Barber, Yi-Tsung Lee, Yu-Jane Liu and Terrance Odean assess the success of day traders in the Taiwan stock market. Using detailed individual trading records, they find that:
October 21, 2004 - Sentiment Indicators
…consumer confidence is not a worthwhile indicator for stock market investors and traders.