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Investing Research Articles

3163 Research Articles

Dumb Individual Investors and Smart Companies?

…mutual funds may function mostly as passive vehicles through which active individual investors (reallocators) voluntarily transfer wealth to public corporations. By doing the opposite of these individuals, one can construct a portfolio with high returns. By ceasing reallocations, mutual fund investors in aggregate could boost their Sharpe ratio by 9%.

Going with the Flows

…front-running the predictable effects of unusual mutual fund inflows and outflows on stocks held in common offers significant excess returns.

Detecting Wisdom in a Crowded Market

…situations involving herded traders and/or a small number of shareholders are good candidates for producing mispriced stocks.

Expert Overconfidence?

…expertise does not mitigate bias. Even highly experienced investors/traders should consider measuring their estimation errors for related tasks to calibrate their judgments.

The 5-Star Kiss of Death

…portfolio changes after achieving the Morningstar 5-star rating hurt fund performance, and investors should be cautious about using this rating as the principal means of selecting mutual funds. Handling large cash inflows attracted by the high rating may be the culprit.

Stock Market Forecasting

If your crystal ball has not been working so well…

Do Stocks Ever Hit Analyst Target Prices?

…analyst stock price targets are not good predictors of actual stock price potentials. Analysts exhibit this poor performance because they want to express optimism about the stocks they cover and have no compensation incentives or public accountability related to stock price targets.

What Makes Shorts Throw in the Towel?

…short sellers throw in the towel (throw more punches) when stock prices move against (with) their positions.

The Animal Spirits of Day Trading

…given that trading involves logical reasoning, numerical computation and long-term planning, one component of successful trading may be a reduced level of emotional reactivity.

The Best Benchmarkers, Ever!

…stocks have significantly outperformed less risky asset classes in the U.S. for over 200 years. Volatility comes with the outperformance.