Should investors trust artificial intelligence (AI) models such as ChatGPT to pick stocks? In their August 2023 paper entitled “ChatGPT-based Investment Portfolio Selection”, Oleksandr Romanko, Akhilesh Narayan and Roy Kwon explore use of ChatGPT to...
Is dispersion of stock return forecasts from different machine learning models trained on the same history (as a proxy for variation in human beliefs) a useful predictor of stock returns? In their August 2023 paper...
What is the right balance between seeking alpha and avoiding taxes? In their August 2023 paper entitled “Alpha Now, Taxes Later: Tax-Efficient Long-Only Factor Investing”, Yin Chen and Roni Israelov assess trade-offs between rebalancing benefits...
Below is a weekly summary of our research findings for 8/21/23 through 8/25/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
Alternative assets (private equity, private market real estate, hedge funds and other assets apart from stocks and bonds) constitute approximately 30% of U.S. public pension fund portfolios and 60% of large U.S. endowment portfolios. Are...
In response to “PPI and the Stock Market”, a subscriber hypothesized that increases and decreases in the ratio of the Consumer Price Index (CPI) to the Producer Price Index (PPI) are bullish and bearish for...
Inflation at the producer level (per the Producer Price Index, PPI) is arguably an advance indicator for inflation downstream at the consumer level (per the Consumer Price Index, CPI). Do investors reliably react to changes...
While prior research indicates that analyst forecasts of future stock returns are substantially biased upward, might the relative rankings of return forecasts be informative? In their June 2023 paper entitled “Analysts Are Good at Ranking...
Below is a weekly summary of our research findings for 8/14/23 through 8/18/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
A subscriber requested comparison of four variations of an “Ivy 5” asset class allocation strategy, as follows: Ivy 5 EW: Assign equal weight (EW), meaning 20%, to each of the five positions and rebalance annually....
Below is a weekly summary of our research findings for 8/7/23 through 8/11/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
What conditions affect the correlation between stock and bond returns, a critical input to asset allocation decisions? In their July 2023 paper entitled “Empirical Evidence on the Stock-Bond Correlation”, Roderick Molenaar, Edouard Senechal, Laurens Swinkels...
Below is a weekly summary of our research findings for 7/31/23 through 8/4/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
What is the state of machine learning in finance? In their July 2023 paper entitled “Financial Machine Learning”, Bryan Kelly and Dacheng Xiu survey studies on the use of machine learning in finance to further...
During 1989 through 2019, the S&P 500 Index generated 5.5% real annual return, compared to just 2.5% annual real growth in U.S. gross domestic product (GDP). How can this disconnect happen? Can it continue? In...
Below is a weekly summary of our research findings for 7/24/23 through 7/28/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
Which previously researched variables or combinations of such variables best predict long-term U.S. stock market returns? In their June 2023 paper entitled “Estimating Long-Term Expected Returns”, Rui Ma, Ben Marshall, Nhut Nguyen and Nuttawat Visaltanachoti...
With monthly market state specified as positive (negative) when prior-month market excess return relative to U.S. Treasury bill (T-bill) yield is positive (negative), “Equity Factor Performance Following Positive and Negative Market Returns” reports that average...
Do stock return anomalies perform differently after positive and negative monthly market returns? In their July 2023 paper entitled “The Market State, Mispricing and Asset Pricing Anomalies”, Michael Di Carlo and Ilias Tsiakas examine the...
Are intraday stock market exchange-traded funds (ETF), stock sector ETFs and individual stock returns exploitably predictable at short horizons? In their June 2023 paper entitled “Intraday Stock Predictability Everywhere”, Fred Liu and Lars Stentoft study...
Below is a weekly summary of our research findings for 7/17/23 through 7/21/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
What modeling techniques help avoid biases/overfitting in use of machine learning to predict stock returns? In his July 2023 paper entitled “Less is More? Reducing Biases and Overfitting in Machine Learning Return Predictions”, Clint Howard...
Does an expectation of an unusually large number of firm defaults in the coming year usefully predict stock and bond market returns? In their May 2023 paper entitled “Systematic Default and Return Predictability in the...
Below is a weekly summary of our research findings for 7/10/23 through 7/14/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
Can state-of-the-art artificial intelligence (AI) applications such as GPT-4, trained on the text of billions of web documents, provide sound financial advice? In their June 2023 paper entitled “Using GPT-4 for Financial Advice”, Christian Fieberg,...