Investing Research Articles

Is the stock market overnight move effect exploitable? To investigate, we look at performances of two recently launched exchange-traded funds (ETF) designed to exploit the effect: NightShares 500 ETF (NSPY), which “seeks to return the night performance of a portfolio of 500 large cap U.S. companies.” The benchmark is SPDR S&P 500 ETF Trust (SPY)…. Keep Reading

A subscriber asked about frequency, magnitude and duration of bear market rallies. To investigate, we employ the S&P 500 Index and consider three ways to define a bear market: From the day the index is first down over 20% from a prior peak until the day it closes no more than 20% down (< -20%… Keep Reading

Is the gap between the yield on the 10-year constant maturity U.S. Treasury note (T-note) and the 10-Year breakeven inflation rate (a measure of expected inflation over the next 10 years derived from T-note yield and 10-Year Treasury inflation-indexed constant maturity securities yield) indicative of future stock market or U.S. Treasury bond yields? To investigate,… Keep Reading

Does the sentiment expressed by major newspapers about the economy usefully predict stock market returns? To investigate, we employ the Daily News Sentiment Index, constructed from “economics-related news articles from 24 major U.S. newspapers [across] all major regions of the country…with at least 200 words… The Daily News Sentiment Index is constructed as a trailing weighted-average… Keep Reading

Below is a weekly summary of our research findings for 8/15/22 through 8/19/22. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Is systematically selling covered equity put options, as implemented by exchange-traded funds (ETF), attractive? To investigate, we consider four equity put-write ETFs, two dead and two living: US Equity High Volatility Put Write (HVPW) – oriented toward individual stocks (dead). ALPS Enhanced Put Write Strategy (PUTX) – index-oriented (dead). WisdomTree CBOE S&P500 PutWriteStrat (PUTW) – index-oriented… Keep Reading

A subscriber suggested testing SentimenTrader’s Dumb Money Confidence model “that incorporates more than a dozen indicators that have a track record of cycling to extremes, and equating with ebbs and flows in sentiment among broad categories of investors.” To investigate, we transcribe monthly values of Dumb Money Confidence from the chart at the link and… Keep Reading

Which variables deserve greatest focus when predicting stock market returns? In their July 2022 paper entitled “Searching for the Best Conditional Equity Premium Model”, Hui Guo, Saidat Sanni and Yan Yu exhaustively explore combinations of 18 previously identified potential stock market return predictors to isolate the most powerful subset. They focus on a best subset… Keep Reading

Does quantified uncertainty in government economic policy reliably predict stock market returns? To investigate, we consider the U.S. Economic Policy Uncertainty (EPU) Index, created by Scott Baker, Nicholas Bloom and Steven Davis and constructed from three components: Coverage of policy-related economic uncertainty by prominent newspapers. Number of temporary federal tax code provisions set to expire in… Keep Reading

Are the “Simple Asset Class ETF Value Strategy” (SACEVS) and the “Simple Asset Class ETF Momentum Strategy” (SACEMS) mutually diversifying. To check, based on feedback from subscribers about combinations of interest, we look at three equal-weighted (50-50) combinations of the two strategies, rebalanced monthly: 50-50 Best Value – EW Top 2: SACEVS Best Value paired with SACEMS Equally… Keep Reading