Investing Research Articles

Does the Halloween effect (sell in May) still hold? In the June 2013 version of their paper entitled “Are Stock Markets Really so Inefficient? The Case of the ‘Halloween Indicator’”, Hubert Dichtl and Wolfgang Drobetz investigate whether true out-of-sample results confirm that the Halloween effect persists for five total return indexes: S&P 500, DAX 30,… Keep Reading

The guiding belief of the Fed Model of stock market valuation is that investors use a Treasury note (T-note) yield as a benchmark for the expected (forward) earnings yield of the stock market. When the gap between the forward earnings yield and the T-note yield is positive (negative), stocks are relatively attractive (unattractive), and investors… Keep Reading

Can investors rely on overvaluation signals from the market price-earnings ratio (P/E) and the Fed Model to predict major stock market corrections? Which model works better? In their July 2013 paper entitled “Does the Bond-Stock Earning Yield Differential Model Predict Equity Market Corrections Better Than High P/E Models?”, Sebastien Lleo and William Ziemba test the power of… Keep Reading

We are continuing to test interest in a poll regarding which of nine asset classes will perform best during the next calendar month (September 2013). The poll is in the right-hand column on the CXOadvisory.com home page below the “CURRENT MOMENTUM WINNERS” box. Participation and results are open only to CXOadvisory.com subscribers. Our assumption (based on… Keep Reading

Does trading based on simple moving average crossings reliably improve the performance of a portfolio diversified across asset classes? In the February 2013 update of his paper entitled “A Quantitative Approach to Tactical Asset Allocation”, Mebane Faber examines the effects of applying a 10-month simple moving average (SMA10) timing rule separately to each of the… Keep Reading

Will increases in central bank and investor holdings of gold drive its price higher? Or, is the price of gold in bubble territory, portending weak future returns? In the May 2013 update of their paper entitled “The Golden Dilemma”, Claude Erb and Campbell Harvey investigate how investors should treat gold in asset allocation. They consider a… Keep Reading

Does exceptional (idiosyncratic) stock volatility exploitably predict future returns? In her April 2013 paper entitled “Revisiting Idiosyncratic Volatility and Stock Returns”, Fatma Sonmez re-examines the relationship between idiosyncratic volatility and future stock returns. She defines idiosyncratic volatility as the standard deviation of daily residuals from monthly regressions of returns (in excess of the risk-free rate) for… Keep Reading

Do the relationships among returns for stocks and the most heavily traded commodities (gold and crude oil) consistently offer risk diversification? In their July 2013 paper entitled “Gold, Oil, and Stocks”, Jozef Baruník, Evzen Kocenda and Lukas Vacha analyze the return relationships among stocks ( the S&P 500 Index), gold and oil (light crude) over… Keep Reading

Do quantitatively-driven mutual fund managers such as John P. Hussman, Ph.D, president of Hussman Investment Trust, successfully time the stock market? He describes his market timing approach as follows: “The key elements in evaluating securities and market conditions are ‘valuations’ and ‘market action.’ Each unique combination of these conditions results in a distinct Market Climate,… Keep Reading

How well does stock screening research translate into performance? In the mid-1990s, James O’Shaughnessy identified “cornerstone value” and “cornerstone growth” as best-of-breed equity investment strategies. The former emphasizes dividends among large-capitalization stocks, and the latter momentum/earnings growth for a broader universe. Based on Standard and Poor’s Compustat data, he found that the value (growth) strategy… Keep Reading