Investing Research Articles

Capitalization-weighted stock indexes arguably incorporate a performance drag by overweighting overvalued stocks and underweighting undervalued stocks. In their February 2009 paper entitled “Fundamental Indexing: An Analysis of the Returns, Risks and Costs of Applying the Strategy”, Roel Houwer and Auke Plantinga examine the raw and risk-adjusted returns of hypothetical indexes of European stocks weighted by… Keep Reading

…German investor sentiment correctly anticipates equity market moves over the next few months to some degree. U.S. investor sentiment used to to be a contrarian indicator for equity market moves over coming months, but its predictive power has disappeared.

…evidence indicates that discount retail broker clients lose money on average to both non-discount retail broker clients and institutional investors, while non-discount brokerage clients have some success trading against institutions.

…investors may be able to exploit a stock price effect by focusing on the associated abnormally positive return during the first calendar quarter.

…adjusting asset class allocations according to key economic indicators may help investors manage risk and/or boost long-term returns.

…even though S&P 500 index timing rules based on fundamental indicators and investor sentiment indicators might significantly beat a buy-and-hold benchmark when evaluated in isolation, this outperformance generally evaporates after correcting for data snooping bias. In other words, luck is the dominant differentiator of rule performance.

…finance and economics professors on average currently estimate that investors require an annual excess return from equities in the range 5% to 7%.

Do individuals who use investment advisors achieve higher returns than those who do not? Two closely related papers entitled “Investment Advice and Individual Investor Portfolio Performance” of January 2009 by Marc Kramer and “The Impact of Financial Advisors on Individual Investor Portfolio Performance” of March 2012 by Marc Kramer and Robert Lensink address this question…. Keep Reading

…the way to survive the fat-tailedness of investment returns is through limiting exposure to such investments.

…evidence from this 19th century test supports belief in the persistence of the size effect and the value premium for equities.