Investing Research Articles

Do changes in the U.S. federal regulatory burden predict U.S. stock market returns? To check, we consider two measures of the regulatory burden: Annual number of pages in the Federal Register (FR) during 1936-2016 – “…in which all newly proposed rules are published along with final rules, executive orders, and other agency notices—provides a sense of… Keep Reading

How serious is the snooping bias (p-hacking) derived from brute force mining of stock trading strategy variations? In their August 2017 paper entitled “p-Hacking: Evidence from Two Million Trading Strategies”, Tarun Chordia, Amit Goyal and Alessio Saretto test a large number of hypothetical trading strategies to estimate an upper bound on the seriousness of p-hacking and to estimate the… Keep Reading

…while research generally supports belief in an intermediate-term momentum effect for equities, it is not obvious that the FUNDX mutual fund substantially exploits the effect. Investors may be able to capture more of the effect by applying the NoLoad FundX approach more purely themselves.

Does financial market volatility identify bubbles and predict subsequent crashes? In their April 2017 paper entitled “Can We Use Volatility to Diagnose Financial Bubbles? Lessons from 40 Historical Bubbles”, Didier Sornette, Peter Cauwels and Georgi Smilyanov examine price volatility before, during and after 40 financial market bubbles to determine whether realized and/or implied volatility warn of bubble conditions… Keep Reading

Does incorporation of stock price acceleration boost the performance of a conventional momentum strategy? In their July 2017 paper entitled “Evolution of Historical Prices in Momentum Investing”, Li-Wen Chen, Hsin-Yi Yu and Wen-Kai Wang examine whether stock price acceleration adds value to a conventional momentum strategy among U.S. stocks by identifying the best winners and the worst losers…. Keep Reading

Do markets exploitably misprice stocks? In their July 2017 paper entitled “Global Market Inefficiencies”, Söhnke Bartram and Mark Grinblatt assess the exploitability of deviations from fair stock prices worldwide based on publicly known accounting data. Specifically, they each month: Regress market capitalizations of all stocks sampled on 21 annual accounting variables from most recently disclosed balance sheets… Keep Reading

Do stock scammers use Twitter to manipulate prices of microcap stocks? In his August 2017 paper entitled “Market Manipulation and Suspicious Stock Recommendations on Social Media”, Thomas Renault performs an event study to analyze returns for microcap stocks around spikes in Twitter activity about the stocks. He identifies tweets about a stock as those containing a… Keep Reading

Do changes in Twitter activity about a stock predict its future returns? In their July 2017 paper entitled “Is All that Twitters Gold? Social Media Attention and Stock Returns”, David Rakowski, Sara Shirley and Jeffrey Stark investigate whether Twitter activity: (1) drives noise trading by concentrating investor attention; and, (2) amplifies the effect of fundamental information in news… Keep Reading

What aspect of momentum strategy volatility is best for risk management? In his July 2017 paper entitled “Risk-Managed Momentum: The Effect of Leverage Constraints”, Federico Nucera examines stock momentum strategy risk management via different aspects of realized strategy variance with and without latitude for leverage. Specifically, he considers the following stock momentum strategy variations: Conventional… Keep Reading

Do the returns of iPath S&P 500 VIX Short-term Futures ETN (VXX) and VelocityShares Daily Inverse VIX Short-term ETN (XIV) vary systematically across days of the week? To investigate, we look at daily close-to-open, open-to-close and close-to-close returns for both. Using daily split-adjusted opening and closing prices for VXX during February 2009 through July 2017 and… Keep Reading