Investing Research Articles

Is the aggregate effect of technical trading visible and exploitable in currency exchange rate trading? In his 2008 paper entitled “Aggregate Trading Behaviour of Technical Models and the Yen/Dollar Exchange Rate 1976-2007”, Stephan Schulmeister investigates the interaction between the aggregate signaling of 1,024 moving average and momentum rules and the behavior of the yen/dollar exchange… Keep Reading

Is technology driving the profitability of technical rules in financial markets from low-frequency trading to high-frequency trading? In his March 2007 paper entitled “The Profitability of Technical Stock Trading Has Moved from Daily to Intraday Data”, Stephan Schulmeister investigates how well 2,580 widely used trend-following and contrarian technical trading rules (moving average, momentum and relative… Keep Reading

How strongly should investors believe in models of financial markets and asset prices? In his contemplative November 2010 paper entitled “Metaphors, Models & Theories”, Emanuel Derman reflects on the tractability of finance in general and the degree to which financial models are useful. Largely by comparison to theorizing and modeling in physics, he observes that:

Is the size effect broad and dependable, or narrow and erratic (even gone)? In the November 2010 version of his paper entitled “A Literature Review of the Size Effect”, Michael Crain summarizes past research on the size effect in equity returns, with size measured conventionally as market capitalization. Surveying the major papers on this anomaly,… Keep Reading

Author Jeff Augen describes his 2010 book Trading Realities: The Truth, the Lies, and the Hype In-Between as “designed to help investors understand the economic and political forces that drive financial markets and to invest alongside those forces instead of against them. It also provides a blunt assessment of the limitations that most private investors… Keep Reading

In his 2010 book Trade the Trader: Know Your Competition and Find Your Edge for Profitable Trading, author Quint Tatro observes that “…what most investors don’t understand as they start to learn their basic technical patterns…is they are the ones actually in play. Seasoned traders are no longer just cuing off of charts or indicators,… Keep Reading

Does pairs trading work for exchange-traded funds (ETF)? In the November 2010 version of their paper entitled “ETF Arbitrage”, Ben Marshall, Nhut Nguyen and Nuttawat Visaltanachoti examine arbitrage opportunities among three dollar-traded ETFs designed to track the S&P 500 Index: SPDR S&P 500 (SPY); iShares S&P 500 Index (IVV); and, the Swiss Exchange iShares S&P… Keep Reading

Is aggregate equity investor fear multifaceted? In the August 2010 version of his paper entitled “The Equity Fear Premium and Daily Comovements of the S&P 500 E/P ratio and Treasury Yields before and during the 2007 Financial Crisis”, Christophe Faugère introduces a Total Fear Premium derived from independent flight-to-safety and flight-to-liquidity impulses. The flight-to-safety component… Keep Reading

Author Meir Statman states that his 2010 book What Investors Really Want “is about what we want from our investments. It is about how we think about our investments, how we feel about them, and how investment markets drive us crazy as we try to cajole them into giving us what we want… The sum… Keep Reading

Is pairs trading (buying the loser and selling the winner of close-substitute stocks that have diverged unusually in price) profitable after accounting for reasonable trading frictions? In the November 2010 version of their paper entitled “Are Pairs Trading Profits Robust to Trading Costs?”, Binh Do and Robert Faff examine the impact of trading friction (commissions,… Keep Reading