Investing Research Articles

…raw stock returns for firms in new U.S. industries tend on average to be positive and substantial, but very concentrated among a few companies. Risk-adjusted returns for new industries mostly match or underperform the broad U.S. stock market over their first 15-20 years.

…investors should probably use the excess market return (beta), size and liquidity factors in explaining and predicting individual stock returns, but not the book-to-market ratio (value factor) or other commonly used stock/firm-specific factors.

…evidence indicates that an up/down January is predictive of February-December outperformance/underperformance for the broad U.S. stock market (but not for most other equity markets). However, it may not support an effective market timing strategy as a standalone signal.

…VIX is a roughly mean-reverting and asymmetrical measure of the price of stock portfolio insurance, and that price is empirically reasonable.

…long-term stock market timing models may enhance investment returns, especially on a risk-adjusted basis. Which model is best depends on the risk-adjustment metric used.

A rare sighting…

…”normal” statistical metrics and associated risk management methods do not work in the realm of Black Swans (including financial markets). Redundancy, not optimization, helps manage risk in this realm.

…the Darlings of the Dow strategy offered solid returns over the short post-publication period of 2002-2007, but the level of data mining bias in these returns is unknown and strategy adjustments have impaired out-of-sample testing.

…investors/traders may be able to earn significant abnormal returns by following the lead of short sellers when the short sellers disagree with expert equity analysts (short sellers know best).

…equity returns may react quickly to some predictors and slowly to others, and they may respond most strongly to short or extended predictor movements. “Standardized” approaches to predictor interval measurement may not work.