Investing Research Articles

How much individual investing is lottery-like, just hoping for a big score with no analysis? In their June 2010 paper entitled “Natural Experiments on Individual Trading: Substitution Effect Between Stock and Lottery”, Xiaohui Gao and Tse-Chun Lin relate individual trading activity to national lottery jackpot size in Taiwan. Using twice-weekly lottery jackpots and contemporaneous Taiwan… Keep Reading

“I found Investors FastTrack via a search last night. Do you know anything about them?”

…evidence indicates that sophisticated investors appear to recognize the importance of trading friction to net return and gauge holding periods accordingly.

…the burden of assessing the value of Tom DeMark’s indicators and associated services is heavily on the side of the prospective buyer.

…evidence suggests that frequent, low-cost traders may be able to offset part of trading frictions by exploiting daily patterns in stock returns.

A reader suggested: “With the annual Russell rebalancing coming later this month, maybe you could post some profitable trading strategies.” A search of the Social Science Research Network (SSRN) for “index rebalancing” and “index reconstitution” and “Russell rebalancing” and “Russell reconstitution” locates the following research (in reverse posting chronology):

…evidence from simple tests does not support a belief that clusters of daily volatility reliably signal poor future returns.

…evidence from laboratory experiments indicates that simulated experience, especially with graphical display of results, instills a more realistic grasp of investment choices than does exposure to numerical statistics.

…investors may be able to use simple trend-following rules to enhance returns from a strategy designed to capture a combination of the equity risk premium from stocks and the volatility risk premium from short options.

…investors may be able to exploit the predictability of equity return volatility via a dynamic leverage strategy that increases (decreases) leverage when predicted volatility is low (high).