Investing Research Articles

Financial media and expert commentators often cite the U.S. unemployment rate as an indicator of economic and stock market health, generally interpreting a jump (drop) in the unemployment rate as bad (good) for stocks. Conversely, investors may interpret a falling unemployment rate as a trigger for increases in the Federal Reserve target interest rate (and… Keep Reading

Below is a weekly summary of our research findings for 7/19/21 through 7/23/21. 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.

U.S. job gains or losses receive prominent coverage in the monthly financial news cycle, with media and expert commentators generally interpreting employment changes as an indicator of future economic and stock market health. One line of reasoning is that jobs generate personal income, which spurs personal consumption, which boosts corporate earnings and lifts the stock… Keep Reading

Do exchange-traded funds selecting stocks based on environmental, social, and governance characteristics (ESG ETF) typically offer attractive performance? To investigate, we compare performance statistics of seven ESG ETFs, all currently available, to those of simple and liquid benchmark ETFs, as follows: iShares MSCI USA ESG Select ETF (SUSA), with SPDR S&P 500 ETF Trust (SPY) as… Keep Reading

Does the sentiment of social media uniquely predict stock market movements, or does it simply mirror the overall sentiment of traditional media? In their May 2021 paper entitled “Investor Sentiment, Media and Stock Returns: The Advancement of Social Media”, Ioanna Lachana and David Schröder compare abilities of daily social and traditional media sentiments to predict… Keep Reading

In response to the U.S. stock market timing backtest in “Usefulness of P/E10 as Stock Market Return Predictor”, a subscriber suggested combining a 10-month simple moving average (SMA10) technical signal with a P/E10 (or Cyclically Adjusted Price-Earnings ratio, CAPE) fundamental signal. Specifically, we test: SMA10 – bullish/in stocks (bearish/in government bonds) when prior-month stock index… Keep Reading

In response to the U.S. stock market timing backtest in “Usefulness of P/E10 as Stock Market Return Predictor”, a subscriber suggested a modification for exploiting P/E10 (or Cyclically Adjusted Price-Earnings ratio, CAPE). Instead of binary signals that buy (sell) stocks when P/E10 crosses below (above) its historical average, employ a scaled allocation to stocks that… Keep Reading

Below is a weekly summary of our research findings for 7/12/21 through 7/16/21. 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.

Does P/E10 (or Cyclically Adjusted Price-Earnings ratio, CAPE) usefully predict U.S. stock market returns? Per Robert Shiller’s data, P/E10 is inflation-adjusted S&P Composite Index level divided by average monthly inflation-adjusted 12-month trailing earnings of index companies over the last ten years. To investigate its usefulness, we consider in-sample regression/ranking tests and out-of-sample cumulative performance tests. Using monthly values of… Keep Reading

Are stock quality strategies, as implemented by exchange-traded funds (ETF), attractive? To investigate, we consider five ETFs, all currently available (from oldest to youngest): Invesco S&P 500 Quality ETF (SPHQ) – seeks to track performance of S&P 500 stocks with the highest quality scores based on firm return on equity, accruals ratio and financial leverage… Keep Reading