Investing Research Articles

…the bid-ask spread, transaction costs and the price impact of trading make the value premium in small-capitalization stocks hard to capture. The prey is generally too elusive for mutual funds and indexes.

…exceptionally volatile stocks are on average inferior investments, or at least trades. There is no reward for this kind of risk, and presently no explanation for this effect.

…practitioners who use the Fed Model are simpletons. The model is theoretically implausible and empirically challenged.

…corporate profitability and earnings growth exhibit non-linear mean reversion.

…investing in options as a marginal enhancement to a buy-and-hold approach can improve returns and Sharpe ratios, but only if the options positions are small compared to overall portfolio size.

…the power law distribution of sizes of large investors, along with the optimal trading behavior of those investors, explains the excess volatility observed in asset markets.

“…[T]he human mind has a predilection for rampant, uncontrolled induction, and it requires much education to overcome this.”

“The variables that economists have found to be associated with increases in per capita income, to sum up, fall under two headings: investment and institutions.”

…hidden gems (unlike hidden lumps of coal) generally do not want to be hidden. The best small firms solicit analyst coverage to get investor attention.

…the empirical foundation for value investing may not be as sound as generally thought.