October 15, 2024 - Big Ideas, Equity Premium
Can market efficiency be falling despite ubiquitous data, computing and networking? In his August 2024 paper entitled “The Less-Efficient Market Hypothesis”, Clifford Asness argues that markets have become less efficient in the relative pricing of common stocks over recent decades. To make his argument, he relies on the ratio of expensive stock valuations to cheap… Keep Reading
October 14, 2024 - Individual Investing, Investing Expertise
Would someone who knows tomorrow’s financial headlines today be a good day trader? In their September 2024 paper entitled “When a Crystal Ball Isn’t Enough to Make You Rich”, Victor Haghani and James White report results of “The Crystal Ball Challenge.” They ask 118 young adults trained in finance to trade the S&P 500 Index… Keep Reading
October 11, 2024 - Miscellaneous
Below is a weekly summary of our research findings for 10/7/24 through 10/11/24. 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.
October 11, 2024 - Momentum Investing, Value Premium
Is momentum a rational firm earnings growth proxy rather than a manifestation of investor underreaction/overreaction to news? In their August 2024 paper entitled “A Unified Framework for Value and Momentum”, Jacob Boudoukh, Tobias Moskowitz, Matthew Richardson and Lei Xie present an asset pricing model that treats value and momentum as complementary inputs to a present… Keep Reading
October 10, 2024 - Economic Indicators
The Inflation Forecast now incorporates actual total and core Consumer Price Index (CPI) data for September 2024. The actual total (core) inflation rate is a little lower than (a little higher than) forecasted.
October 10, 2024 - Economic Indicators, Fundamental Valuation, Sentiment Indicators
What variables best explain increases and decreases in Cyclically Adjusted Price-to-Earnings ratio (CAPE or P/E10)? In their August 2024 paper entitled “Analyzing Changing ‘Investor Exuberance’: The Determinants of S&P Composite Index Total Return CAPE Changes”, C. Krishnan, Jiemin Yang and Xiyao Tan apply the following three techniques to investigate which of 42 potentially explanatory variables… Keep Reading
October 9, 2024 - Equity Options
How consequential are trading frictions for equity options, and how do these frictions vary across brokers? In their September 2024 paper entitled “Some Anonymous Options Trades Are More Equal than Others”, Xing Huang, Philippe Jorion and Christopher Schwarz compare retail option trade executions by placing the same orders across six brokers: E*Trade, Fidelity, Robinhood, Schwab,… Keep Reading
October 8, 2024 - Equity Premium, Technical Trading
Short-term reversal is a widely accepted stock return anomaly, with the long-only version glibly termed “buy the dip.” Is short-term reversal readily exploitable? As a live test, we look at the performance of Vesper U.S. Large Cap Short-Term Reversal Strategy ETF (UTRN). This fund seeks to capture bounces of stocks with recent sharp declines by… Keep Reading
October 7, 2024 - Big Ideas, Equity Premium
Why have stock return anomalies generally degraded over recent decades? In their August 2024 paper entitled “What Drives Anomaly Decay?”, Jonathan Brogaard, Huong Nguyen, Tālis Putniņš and Yuchen Zhang examine why stock return anomalies decay by: Decomposing returns into market-wide, public firm-specific and private firm-specific elements. Separating cash flow and discount rate effects within each… Keep Reading
October 4, 2024 - Miscellaneous
Below is a weekly summary of our research findings for 9/30/24 through 10/4/24. 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.
October 4, 2024 - Bonds, Commodity Futures, Economic Indicators, Equity Premium, Gold, Real Estate
How do returns of different asset classes recently interact with the Effective Federal Funds Rate (EFFR)? We focus on monthly changes (simple differences) in EFFR and look at lead-lag relationships between change in EFFR and returns for each of the following 10 exchange-traded fund (ETF) asset class proxies: Equities: SPDR S&P 500 (SPY) iShares Russell… Keep Reading