Investing Research Articles

Do differences in equity sector responses to stock market crashes (and associated volatility spikes) support an exploitably attractive sector rotation strategy? In the November 2020 update of his paper entitled “Actively Using Passive Sectors to Generate Alpha Using the VIX”, Michael Gayed examines a cyclical-defensive sector rotation strategy using the level of the CBOE S&P… Keep Reading

Do stocks with high borrowing costs reliably underperform? In their October 2020 paper entitled “The Loan Fee Anomaly: A Short Seller’s Best Ideas”, Joseph Engelberg, Richard Evans, Gregory Leonard, Adam Reed and Matthew Ringgenberg examine equity loan fees (stock borrowing costs) as a predictor of stock returns. For perspective, they compare returns of their loan… Keep Reading

Below is a weekly summary of our research findings for 11/16/20 through 11/20/20. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

“Market Impacts of Growth in Target Date Funds” summarizes research on potential market-wide effects of periodic rebalancing actions of Target Date Funds (TDF), which trade against momentum. One piece of evidence is that monthly autocorrelation of S&P 500 Index returns is significantly negative during 2010-2019 but not during 1986-1995 or 1996-2005. Another is that TDFs… Keep Reading

Are aggregate periodic stocks-bonds rebalancing actions of Target Date Funds (TDF), which trade against momentum, increasingly affecting U.S. stock market dynamics? In their October 2020 paper entitled “Retail Financial Innovation and Stock Market Dynamics: The Case of Target Date Funds”, flagged by a subscriber, Jonathan Parker, Antoinette Schoar and Yang Sun examine market impacts of… Keep Reading

Does the U.S. stock market respond predictably to simultaneous earnings announcements of attention-grabbing companies? In their September 2020 paper entitled “Famous Firms, Earnings Clusters, and the Stock Market”, Yixin Chen, Randolph Cohen and Zixuan Wang examine U.S. stock market (E-mini S&P 500 futures) responses to earnings announcement clusters (EAC) comprised of high-attention firms. They focus… Keep Reading

Below is a weekly summary of our research findings for 11/9/20 through 11/13/20. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Is aggregate U.S. stock market value sensitive to flows of new funds (inelastic)? In their October 2020 paper entitled “In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis”, Xavier Gabaix and Ralph Koijen analyze aggregate stock market fluctuations in relation to flows of money into and out of stocks by different investor… Keep Reading

Does technology amplify adverse herding among inexperienced investors? In their October 2020 paper entitled “Attention Induced Trading and Returns: Evidence from Robinhood Users”, Brad Barber, Xing Huang, Terrance Odean and Christopher Schwarz test the relationship between episodes of intense stock buying by retail (Robinhood) investors and future returns. Their source for buying intensity is the… Keep Reading

Has growth in the importance of intangible (knowledge) assets versus real assets undermined usefulness of the conventional equity value premium (based only on the latter)? In her September 2020 paper entitled “Intangibles: The Missing Ingredient in Book Value”, Feifei Li explores whether including intangible assets when calculating book value better measures firm fundamental value. She… Keep Reading