Investing Research Articles

A subscriber asked for an extended test of a very simple momentum strategy that each month holds Vanguard 500 Index Fund Investor Shares (VFINX) or Vanguard Long-Term Treasury Fund Investor Shares VUSTX according to which of these funds has the highest total return over the last three months. To investigate, based on the way mutual… Keep Reading

Is buying assets during banking crises, when assets appear to be at deep discounts, an attractive long-run strategy? In their January 2021 paper entitled “Investing in Crises”, Matthew Baron, Luc Laeven, Julien Penasse and Yevhenii Usenko investigate asset returns across several years before and after banking crises, for which they identify the onset (first month)… Keep Reading

Below is a weekly summary of our research findings for 3/15/21 through 3/19/21. 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.

Several recent papers find that most studies identifying factors that predict stock returns are not replicable or derive from snooping of many factors. Is there a good counter-argument? In their January 2021 paper entitled “Is There a Replication Crisis in Finance?”, Theis Ingerslev Jensen, Bryan Kelly and Lasse Pedersen apply a Bayesian model of factor… Keep Reading

A subscriber asked (years ago): “Everyone says I should not invest in bonds today because the interest rate is so low (and inflation is daunting). But real bond returns over the last 30 years are great, even while interest rates are low. Could you analyze why bonds do well after, but not before, 1981?” To… Keep Reading

Is following the lead of certain types of equity investors as effective as using widely accepted factor models of stock returns? In their March 2021 paper entitled “What Do the Portfolios of Individual Investors Reveal About the Cross-Section of Equity Returns?”, Sebastien Betermier, Laurent Calvet, Samuli Knüpfer and Jens Kvaerner construct a factor model of… Keep Reading

Below is a weekly summary of our research findings for 3/8/21 through 3/12/21. 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.

How has the market environment changed with the introduction of zero-commission trading and associated interest in trading among many inexperienced users? In their January 2021 paper entitled “Zero-Commission Individual Investors, High Frequency Traders, and Stock Market Quality”, Gregory Eaton, Clifton Green, Brian Roseman and Yanbin Wu examine market implications of growth in trading by a… Keep Reading

How can the retail trader tail wag the market dog? In their February 2021 paper entitled “The Equity Market Implications of the Retail Investment Boom”, Philippe van der Beck and Coralie Jaunin quantify impacts of the Robinhood-catalyzed retail trading boom on the U.S. stock market. They focus on the early part of the COVID-19 pandemic,… Keep Reading

Under current U.S. accounting rules, many investments in innovation, human resources and brand that are crucial to long-term competitiveness immediately reduce operating profits and earnings (are expensed rather than capitalized). Does failure to incorporate such intangible investments in firm investment and valuation ratios (book-to-market, profitability and return on equity) harm equity investment decisions? In their… Keep Reading