Investing Research Articles

Robert McHugh, Ph.D. sent comments on our review of his stock market commentaries (“Robert McHugh: Caution Is Warranted”). The following exchange presents Dr. McHugh’s messages without editing. We have edited our responses for formality, brevity and inclusion of links:

The unreal deal, as found in the cyber-alleys off Wall Street…

…once adjusted for actual (rather than claimed) investing style, recent hedge fund performance is not a reliable indicator of superior manager ability but is a reliable indicator of inferior manager ability.

…neither journalists nor their informants can systematically and accurately predict stock prices.

…short-term returns are on average significantly higher (lower) following closing prices that lie just above (below) a round number. The effect is probably of ancillary use only to traders.

…the buy recommendations of columnists in prominent business magazines on average underperform an equal-weighted benchmark over the weeks, months and first year after publication. Columnists in Forbes tend to outperform those in Business Week and Fortune.

…options for stock indexes are expensive compared to options for the average individual stock, and options for small and value stocks are expensive compared to options for large and growth stocks. Hedge portfolios exploiting these differences may offer abnormal returns.

…investors can concentrate the informed signals of short sellers by locating stocks with high short interest and low institutional ownership, and an increasing ratio of short interest to institutional ownership.

…change in non-farm employment by itself does not offer enough short-term explanatory power with respect to the stock market to justify trading on the announcement.

Because of the uncertainties involved in choosing stocks, investors/traders are constantly seeking affirmation of their picks. One place they go for affirmation is Jim Cramer’s Mad Money on CNBC. When you get Jim Cramer’s blessing, you’ve got an edge. Your returns will be better than those of your too-good-for-Cramer peers. Or will they? We construct… Keep Reading