Investing Research Articles

Below is a weekly summary of our research findings for 3/22/21 through 3/26/21. 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.

Conventional wisdom holds that a steep yield curve (wide U.S. Treasuries term spread) is good for stocks, while a flat/inverted curve is bad. Is this wisdom correct and exploitable? To investigate, we consider in-sample tests of the relationships between several yield curve metrics and future U.S. stock market returns and two out-of-sample signal-based tests. Using… Keep Reading

What returns and risk should investors expect from private property (real estate, privately owned infrastructure, collectibles and non-corporate business equity), characterized by infrequent trading, inexact market values and noisy returns? In their March 2021 paper entitled “Real and Private-Value Assets”, William Goetzmann, Christophe Spaenjers and Stijn Van Nieuwerburgh survey current research on private property returns… Keep Reading

A subscriber asked for an extended test of a very simple momentum strategy that each month holds Vanguard 500 Index Fund Investor Shares (VFINX) or Vanguard Long-Term Treasury Fund Investor Shares VUSTX according to which of these funds has the highest total return over the last three months. To investigate, based on the way mutual… Keep Reading

A subscriber noted and asked: “Michigan (at one point) claimed that the inflation expectations part of their survey of consumers was predictive. That was from a paper long ago. I wonder if it is still true.” To investigate, we relate “Expected Changes in Prices During the Next Year” (expected annual inflation) from the monthly final University… Keep Reading

Is buying assets during banking crises, when assets appear to be at deep discounts, an attractive long-run strategy? In their January 2021 paper entitled “Investing in Crises”, Matthew Baron, Luc Laeven, Julien Penasse and Yevhenii Usenko investigate asset returns across several years before and after banking crises, for which they identify the onset (first month)… Keep Reading

Below is a weekly summary of our research findings for 3/15/21 through 3/19/21. 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.

Several recent papers find that most studies identifying factors that predict stock returns are not replicable or derive from snooping of many factors. Is there a good counter-argument? In their January 2021 paper entitled “Is There a Replication Crisis in Finance?”, Theis Ingerslev Jensen, Bryan Kelly and Lasse Pedersen apply a Bayesian model of factor… Keep Reading

…long-run data offers stronger evidence for a stock market model based on the real earnings yield than for a model that compares the earnings yield to the long-term bond yield. It also suggests: (1) a substantial structural break in the relationship between earnings yield and inflation about 1960; and, (2) the possibility of using real earnings yield variability in estimating an expected real earnings yield.

A subscriber asked (years ago): “Everyone says I should not invest in bonds today because the interest rate is so low (and inflation is daunting). But real bond returns over the last 30 years are great, even while interest rates are low. Could you analyze why bonds do well after, but not before, 1981?” To… Keep Reading