Investing Expertise

But other people were forecasting even higher… Keep Reading

Predicting Risk analyzing stormy weather… Keep Reading

Taking a break… Keep Reading

Via the semiannual Livingston Survey, the Federal Reserve Bank of Philadelphia solicits forecasts for the S&P 500 index (and many other U.S. economic measures) from economists in industry, government, banking and academia. How good are their forecasts? In his June 2007 paper entitled “Predicting Stock Price Movements: Regressions versus Economists”, Paul Soderlind examines the aggregate stock return forecasting ability of surveyed experts. Using median forecasts for stock market gains during the interval 6-12 months after survey dates and associated actual data for 1952-2005, he concludes that: Keep Reading

In their 2005 paper entitled “A Great Company Can Be a Great Investment”, Jeff Anderson and Gary Smith evaluate the stock returns of companies rated highest in Fortune magazine’s annual surveys of “America’s Most Admired Companies.” Survey respondents are senior executives, directors and securities analysts, and the questions asked seemingly relate indirectly or directly to the investment value of the companies named. Using lists for 1983 (survey inception) through 2004 (a total of 22 years) and associated stock return data for the publicly held companies on the lists, they conclude that: Keep Reading

The sponsors of retirement/endowment plans (public and corporate pension plans, unions, foundations and endowments) retain professionals to manage their funds. Do their decisions to hire and fire such professionals pan out? In other words, do their plans outperform the market after they change managers? In their May 2006 paper entitled “The Selection and Termination of Investment Management Firms by Plan Sponsors”, Amit Goyal and Sunil Wahal examine this question. Using data for 8,204/910 hiring/firing decisions by 3,591 plan sponsors during 1994-2003, they conclude that: Keep Reading

Readers recently requested evaluations of two different retail investment managers. Our reviews involve simply putting the information the firms make available on their web sites into the context of broad stock market research. Our findings for the two firms are similar, as follows: Keep Reading

How well do experts perform in timing individual stock trades? In their May 2007 paper entitled “Individual Security Timing Ability and Fund Manager Performance”, David Gallagher, Andrew Ross and Peter Swan define individual security timing ability as the proportion of potential returns obtained by a trader over the holding period and measure this ability for a set of active Australian equity fund managers. Using a unique database of daily trades and monthly portfolio holdings for 30 fund managers from January 1996 through December 2001, they conclude that: Keep Reading

How does “the group that is arguably best qualified, finance professors, …assess the importance of valuation techniques, asset-pricing models, market anomalies, firm characteristics, corporate events, seasonal variables, and other information” when they invest for themselves? In their April 2007 paper entitled “What Really Matters When Buying and Selling Stocks?”, James Doran and Colby Wright seek to answer this question via an email-initiated electronic survey of 4,525 finance professors at accredited U.S. universities and colleges. Using data provided by 642 qualified respondents, all with Ph.D.’s, they conclude that: Keep Reading

Are stock market forecasters prone to hyperbole? Is there logic to predicting plunges and melt-ups at probabilities unjustified by rigorous empirical analysis? In their February 2007 paper entitled “Probability Elicitation, Scoring Rules, and Competition among Forecasters”, Kenneth Lichtendahl, Jr. and Robert Winkler apply game theory to model the behavior of forecasters who pit themselves not only against the data, but also against each other. In other words, they examine the logical behavior of a forecaster whose reward depends not only on own accuracy but also on the accuracies of competing forecasters. When forecasters compete, they conclude that: Keep Reading