Investing Research Articles

…mutual fund inflows naively chase past returns.

…the media constitute a possibly destabilizing element, since they support the continuation and reinforcement of states of disequilibrium, or maybe even trigger them.

…investor emotions drive market volatility, but there is an asymmetry to fear and greed.

…individual investors should be wary of investing in stocks that are the top mutual fund holdings.

…portfolios built using aggregate analyst recommendations may produce gross outperformance, but transaction costs absorb excess returns. Moreover, privileged investors get the jump on analyst-driven trades.

…the Fed Model has worked pretty well starting about 1960, with interest rates since playing a key role in stock valuation.

In their June 2003 paper entitled “A General Theory of Stock Market Valuation and Return”, Christophe Faugere and Julian Van Erlach contend that past stock returns are overstated and develop a market valuation formula that out-fits the Fed Model. Specifically, they show that:

In his May 2002 paper entitled “Market Timing Strategies that Worked”, Pu Shen evaluates the effectiveness of the spreads between the S&P 500 index earnings yield (the earnings/price ratio or E/P) and the yields on 10-year Treasury notes (T-note) and 3-month Treasury bills (T-bill) as market timing indicators. By constructing “horse races” between switching strategies… Keep Reading

…stock market returns fluctuate away from, and revert to, a running mean on a roughly annual basis.

…investors should avoid stocks with high short interest ratios.