July 14, 2021 - Size Effect
“Stock Size and Excess Stock Portfolio Growth” finds that an equal-weighted portfolio of the (each day) 1,000 largest U.S. stocks beats its market capitalization-weighted counterpart by about 2% per year. However, the underlying research does not account for portfolio reformation/rebalancing costs and may not be representative of other stock universes. Do exchange-traded funds (ETF) that… Keep Reading
July 13, 2021 - Economic Indicators
The Inflation Forecast now incorporates actual total and core Consumer Price Index (CPI) data for June 2021. The actual total (core) inflation rate is much higher than (much higher than) forecasted.
July 13, 2021 - Bonds, Economic Indicators, Equity Premium
A reader commented and asked: “A wide credit spread (the difference in yields between Treasury notes or Treasury bonds and investment grade or junk corporate bonds) indicates fear of bankruptcies or other bad events. A narrow credit spread indicates high expectations for the economy and corporate world. Does the credit spread anticipate stock market behavior?”… Keep Reading
July 12, 2021 - Big Ideas, Currency Trading
What Decentralized Finance (DeFi) issues may dampen associated interest in crypto-assets by undermining its promises of lower costs and risks compared to traditional, centralized financial intermediaries? In their June 2021 book chapter entitled “DeFi Protocol Risks: the Paradox of DeFi”, Nic Carter and Linda Jeng discuss five sources of DeFi risk: Interconnections with the traditional financial… Keep Reading
July 9, 2021 - Miscellaneous
Below is a weekly summary of our research findings for 7/6/21 through 7/9/21. 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.
July 9, 2021 - Big Ideas
Is aggregate data snooping bias (p-hacking) in financial markets research a big issue or a minor concern? In their June 2021 paper entitled “Uncovering the Iceberg from Its Tip: A Model of Publication Bias and p-Hacking”, Campbell Harvey and Yan Liu model the severity of p-hacking based on the view that there are, in fact,… Keep Reading
July 8, 2021 - Economic Indicators, Fundamental Valuation, Investing Expertise, Technical Trading
Can machine learning-generated stock market crash predictions be amenable to human interpretation? In their June 2021 paper entitled “Explainable AI (XAI) Models Applied to Planning in Financial Markets”, Eric Benhamou, Jean-Jacques Ohana, David Saltiel and Beatrice Guez apply a gradient boosting decision tree (GBDT) to 150 technical, fundamental and macroeconomic inputs to generate daily predictions… Keep Reading
July 7, 2021 - Aesthetic Investments, Fundamental Valuation
How do investors react to different kinds of firm-level environmental, social and governance (ESG) news? In their April 2021 paper entitled “Which Corporate ESG News does the Market React to?”, George Serafeim and Aaron Yoon examine stock returns around ESG news from analysts, media, advocacy groups and government regulators (but not firms themselves) as compiled/evaluated… Keep Reading
July 6, 2021 - Aesthetic Investments, Equity Premium
Is outperformance of green (environmentally friendly) stocks relative to brown (not environmentally friendly) stocks due to firm performance or concern about the climate? In other words, do green stocks carry a climate concern premium? In their June 2021 paper entitled “Dissecting Green Returns”, Lubos Pastor, Robert Stambaugh and Lucian Taylor examine relative performance of green… Keep Reading
July 2, 2021 - Miscellaneous
Below is a weekly summary of our research findings for 6/28/21 through 7/2/21. 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.