Investing Research Articles

Are trades based on complex technical patterns, such as head-and-shoulders, rational speculations or noise? In other words, do such patterns reliably indicate opportunities to capture excess returns? In her July 1998 paper entitled “Identifying Noise Traders: The Head-And-Shoulders Pattern in U.S. Equities”, Carol Osler investigates whether head-and-shoulders trading is significant and whether it is profitable…. Keep Reading

…the overnight return on individual stocks is a contrary indicator for next-day returns, but individual “outside” traders may not be able to exploit this tendency.

…newsletters on average offer investors/traders average performance, without the broad diversification benefit of mutual funds.

…an exchange traded fund that focuses on value stocks with repurchase activity would be an attractive long-term investment vehicle.

Jack Schannep, editor of The DowTheory.com, has several times requested that we reconsider parts of our assessment of his specific stock market forecasts, as follows:

…the value premium and the size effect are real manifestations of emergent patterns of noise across large groups of stocks.

…investors/traders are generally willing to overpay for insurance and leverage via options, but only the market makers can consistently exploit this willingness.

…a market inefficiency with respect to volatility expectations for individual stocks may provide a means to beat the market by using options to trade volatility.

…investors/traders write (sell) more options than they purchase and deal much more in calls than in puts. Call writing is mostly hedging, while call purchasing and put writing are mostly speculations on stock prices.

…the persistence of success among some serial entrepreneurs demonstrates that success is not all luck. By similarity, investors/traders who persistently outperform their peers likely have skills in developing superior information about the market.