Investing Research Articles

…the Fed model and the long-term P/E mean reversion model are complementary perspectives on return prediction, with the former reasonably useful for forecasting up to three years into the future and the latter applicable over longer horizons.

How well do commonly used valuation multiples align with actual stock prices? In their January 2007 paper entitled “Multiples and Their Valuation Accuracy in European Equity Markets”, Andreas Schreiner and Klaus Spremann investigate the accuracy of the valuation multiple method in general and the properties of 50 different multiples (see the figure below). They define… Keep Reading

…this review of mutual fund studies makes low-cost, broad market exchange traded funds sound good.

We evaluate here the advice offered in the “Trendspotting” column in SmartMoney.com by Igor Greenwald since October 2002 (the earliest available). Igor Greenwald was a regular writer and columnist for SmartMoney.com. The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days… Keep Reading

…(German financial) journalists show predictive ability in their (1) sell recommendations and (2) buy recommendations for value stocks and positive momentum stocks.

…earnings guidance/forecasts are probably more accurate (to be precise, less intentionally biased) post-SOX than they were pre-SOX.

…surprisingly strong (weak) aggregate earnings news, as an indicator of high (low) future inflation, may portend relatively low (high) future stock returns.

…mimicking the most informative actions of outperforming investors/traders reliably generates abnormal short-term returns. Such behavior may explain some of the momentum effect.

…the Sharpe ratio has such a high level of intrinsic variability that it is not a very reliable portfolio comparison tool.

…portfolio management based on statistically reliable characterization of the long-term trend of the stock market offers an economically significant advantage over approaches that ignore the long-term trend.