Investing Research Articles

When do simple moving averages (SMA) serve as useful trading rules? Do they exploit some hidden pattern in asset price behavior? In their July 2011 paper entitled “The Trend is not Your Friend! Why Empirical Timing Success is Determined by the Underlying’s Price Characteristics and Market Efficiency is Irrelevant “, flagged by a subscriber, Peter… Keep Reading

Is the monthly stock return reversal effect currently exploitable? In the August 2011 version of their paper entitled “New Evidence on Short-Term Reversals in Monthly Stock Returns: Overreaction or Illiquidity?”, Chris Stivers and Licheng Sun investigate the persistence, size-sensitivity and seasonality of monthly stock return reversal in the context of three competing explanations: (1) investor overreaction… Keep Reading

Has the strong appreciation of gold since 2001 produced a price bubble? In their March 2011 paper entitled “Is There a Speculative Bubble in the Price of Gold?”, Jedrzej Bialkowski, Martin Bohl, Patrick Stephan and Tomasz Wisniewski measure deviations of actual gold price from its fundamental value to identify gold bubbles. They use the convenience… Keep Reading

What is fair value for gold, which has no earnings and pays no dividend? In their 2005 paper entitled “The Price of Gold: A Global Required Yield Theory”, Christophe Faugere and Julian Van Erlach present a model of gold valuation based on a view of gold as a global store of real (inflation-adjusted) wealth. This model… Keep Reading

Should investors with different horizons prefer different styles (large versus small capitalization and value versus growth)? In their 2010 paper entitled “Time, Risk and Investment Styles”, Zugang Liu and Jia Wang investigate how equity investment style risks vary with investment horizon. They focus on the downside of asset returns rather than overall volatility to measure risk, arguing… Keep Reading

Do international (seaborne) shipping rates offer advance information about stock market behavior? In the July 2011 draft of their paper entitled “Stock Market Returns and Shipping Freight Market Information: Yet Another Puzzle!”, Amir Alizadeh and Gulnur Muradoglu examine whether changes in the Baltic Exchange Dry Bulk Freight Index (BDI) predict stock market returns and compare… Keep Reading

What happens to the S&P 500 Implied Volatility Index (VIX) after days when it changes dramatically? To ensure that a trader could have identified the days selected in real time and to accommodate volatility regime changes, we define a dramatic change as an advance or decline of at least four standard deviations of the daily… Keep Reading

Can investors apply forensic accounting principles (searching for inconsistencies, irregularities and other signs of trouble) to help forecast stock returns? In their July 2011 paper entitled “To Catch a Thief: Can Forensic Accounting Help Predict Stock Returns?”, Messod Beneish, Charles Lee and Craig Nichols investigate the ability of an earnings manipulation model to predict stock returns and detect fraud…. Keep Reading

What approaches to global diversification work best? In their July 2011 paper entitled “What Matters in International Equity Diversification? “, Chun-hung Chen, Tom Goodwin, and Wenling Lin use mean-variance spanning and optimization tests of indexes to compare benefits of alternative approaches to global diversification of the equity portion of an investor’s portfolio. Specifically, they investigate potential… Keep Reading

As suggested by a reader, we evaluate here the public stock market forecasts of Peter Eliades since late 2002. Evaluated predictions/recommendations come indirectly via MarketWatch columns, which have reported his commentary sporadically in recent years. Peter Eliades is editor of Stock Market Cycles. His “approach to the market is based on the theory that stock prices… Keep Reading