Investing Research Articles

Should investors trust artificial intelligence (AI) models such as ChatGPT to pick stocks? In their August 2023 paper entitled “ChatGPT-based Investment Portfolio Selection”, Oleksandr Romanko, Akhilesh Narayan and Roy Kwon explore use of ChatGPT to recommend 15, 30 or 45 S&P 500 stocks, with portfolio weights, based on textual sentiment as available to Chat GPT… Keep Reading

Is dispersion of stock return forecasts from different machine learning models trained on the same history (as a proxy for variation in human beliefs) a useful predictor of stock returns? In their August 2023 paper entitled “Machine Forecast Disagreement”, Turan Bali, Bryan Kelly, Mathis Moerke and Jamil Rahman relate dispersion in 100 monthly stock return… Keep Reading

What is the right balance between seeking alpha and avoiding taxes? In their August 2023 paper entitled “Alpha Now, Taxes Later: Tax-Efficient Long-Only Factor Investing”, Yin Chen and Roni Israelov assess trade-offs between rebalancing benefits and tax avoidance from overlapping 10-year backtests of long-only momentum, value, quality and safety factor stock portfolios. They measure momentum… Keep Reading

Below is a weekly summary of our research findings for 8/21/23 through 8/25/23. 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.

Alternative assets (private equity, private market real estate, hedge funds and other assets apart from stocks and bonds) constitute approximately 30% of U.S. public pension fund portfolios and 60% of large U.S. endowment portfolios. Are they beneficial? In his August 2023 paper entitled “Have Alternative Investments Helped or Hurt?”, Richard Ennis examines impacts of alternative… Keep Reading

In response to “PPI and the Stock Market”, a subscriber hypothesized that increases and decreases in the ratio of the Consumer Price Index (CPI) to the Producer Price Index (PPI) are bullish and bearish for the stock market, respectively. The reasoning for the hypothesis is that CPI reflects aggregate corporate revenue, while PPI reflects aggregate… Keep Reading

Inflation at the producer level (per the Producer Price Index, PPI) is arguably an advance indicator for inflation downstream at the consumer level (per the Consumer Price Index, CPI). Do investors reliably react to changes in PPI as an indicator of the future wealth discount rate? In other words, is a high (low) producer-level inflation… Keep Reading

While prior research indicates that analyst forecasts of future stock returns are substantially biased upward, might the relative rankings of return forecasts be informative? In their June 2023 paper entitled “Analysts Are Good at Ranking Stocks”, Adam Farago, Erik Hjalmarsson and Ming Zeng apply within-analyst 12-month stock price targets to rank stocks in two ways: Average… Keep Reading

Below is a weekly summary of our research findings for 8/14/23 through 8/18/23. 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.

A subscriber requested comparison of four variations of an “Ivy 5” asset class allocation strategy, as follows: Ivy 5 EW: Assign equal weight (EW), meaning 20%, to each of the five positions and rebalance annually. Ivy 5 EW + SMA10: Same as Ivy 5 EW, but take to cash any position for which the asset… Keep Reading