Investing Research Articles

We occasionally select for retrospective review an all-time “best selling” research paper from the past few years from the General Financial Markets category of the Social Science Research Network (SSRN). Here we summarize the June 2007 paper entitled “The Fundamentals of Commodity Futures Returns” (download count over 2,500) by Gary Gorton, Fumio Hayashi and Geert… Keep Reading

…cash flow expectations represent a significant positively correlated component of stock returns at both firm and aggregate levels. Their importance grows with investment horizon, dominating discount rate expectations for horizons over three years.

…properly structured mutual fund redemption fees tend to protect long-term investors by penalizing frequent traders. Small redemption fees of long duration are optimal for long-term investors.

A reader inquired about the COTs Timer trading system, which employs information from the Commodity Futures Trading Commission’s (CFTC) combined futures and options Commitments of Traders (COT) reports to time the markets for associated assets. In describing these reports, COTs Timer states that: “Devoted fans say they may be the closest thing in the public… Keep Reading

…traders may be able to exploit predictable seasonal changes in implied volatility that derive from the effects of investor mood on perceived risk and not from variations in actual risk.

…individual active traders on average may be able to beat the market when collaborating on trading methods and opportunities.

Is there a predictable market reaction to stocks reaching round-number n-day highs and lows? In their November 2007 paper entitled “Highs and Lows: A Behavioral and Technical Analysis”, Bruce Mizrach and Susan Weerts investigate whether there are systematic trading behaviors for stocks posting 10-day, 25-day, 50-day, 100-day, 150-day, 200-day and 52-week highs and lows. Using… Keep Reading

…Lenny Dykstra’s deep-in-the-money call options (leveraged) strategy depends more on pure volatility and favorable market conditions than on skill in timing the movements of the underlying stocks. A substantial, multi-month market decline could cause the strategy to crash, seriously impacting long-term return on investment.

Do commodity futures exhibit short-term momentum and long-term reversion, as do stocks? In the August 2006 version of their paper entitled “Momentum Strategies in Commodity Futures Markets”, Joelle Miffre and Georgios Rallis examine the profitability of 32 momentum (short-term continuation) and 24 contrarian (long-term reversal) strategies in commodity futures markets. The momentum strategies buy (sell)… Keep Reading

We occasionally select for retrospective review an all-time “best selling” research paper from the past few years from the General Financial Markets category of the Social Science Research Network (SSRN). Here we summarize the January 2006 paper entitled “The Tactical and Strategic Value of Commodity Futures” (download count over 2,400) by Claude Erb and Campbell… Keep Reading