Investing Research Articles

Is there an essential and useful part of investor sentiment independent of any economic and financial indicators that may feed it? In their November 2012 paper entitled “Is ‘Sentiment’ Sentimental?”, Steven Sibley, Yuhang Xing and Xiaoyan Zhang decompose a widely used aggregate investor sentiment index into two components, one related and one unrelated (residual) to common business… Keep Reading

Are European stock market returns predictable? In their September 2012 paper entitled “Forecasting Returns: New European Evidence”, Steven Jordan, Andrew Vivian and Mark Wohar test the ability of fundamental, macroeconomic and technical variables to predict next-month returns in 14 developed and emerging European country stock markets both in-sample and out-of-sample. They consider four fundamental variables (using logarithms): dividend-price ratio; dividend yield; earnings-price… Keep Reading

Does predictable end-of-day rebalancing behavior of leveraged exchange-traded funds (ETF) present trading opportunities? In their October 2012 paper entitled “Intraday Share Price Volatility and Leveraged ETF Rebalancing”, Arthur Rodier, Edgar Haryanto, Pauline Shum and Walid Hejazi examine: (1) the effects of leveraged ETF rebalancing activities on late-day market volatility; and, (2) the profitability of trading strategies designed to… Keep Reading

Does a simple model based on the gap between the stock market earnings yield and an inflation-adjusted Treasury yield usefully predict the equity risk premium (ERP)? In their June 2012 paper entitled “Equities (Still) for the Long Run: A New Look at the Future Equity Premium”, Michael Crook and Brian Nick construct and test a model… Keep Reading

Is price-to-earnings ratio cyclically adjusted via a 10-year average (CAPE, or P/E10) a good predictor of future stock market performance? In his October 2012 paper entitled “The Enhanced Risk Premium Factor Model & Expected Returns”, Javier Estrada examines three simple models that generate 10-year annualized stock market expected return (ER) based on P/E10 and the risk-free… Keep Reading

What is the aggregate posture of all investors or, said differently, the asset class allocation of the average investor? In their November 2012 paper entitled “Strategic Asset Allocation: The Global Multi-Asset Market Portfolio 1959-2011”, Ronald Doeswijk, Trevin Lam and Laurens Swinkels estimate the crowd-sourced relative market valuations of investments in ten asset classes: equities, private equity, listed… Keep Reading

Eric Singer, manager of the Congressional Effect Fund (CEFFX), introduces his 2012 book, Trade the Congressional Effect: How to Profit from Congress’s Impact on the Stock Market, by stating: “This book provides a new, empirically objective way to understand day by day what our government takes away from all of us. It shows in hard numbers what… Keep Reading

Does the rapid appreciation in gold price over the past decade represent a price bubble? In the October 2012 draft of their paper entitled “A Gold Bubble?”, Dirk Baur and Kristoffer Glover test for bubbles in gold price over the past four decades. Their test method is purely technical, focusing on price explosiveness and requiring no… Keep Reading

How can a risk parity allocation strategy, equally weighting portfolio components by expected risk contribution, not really spread risk? In their October 2012 paper entitled “The Risk in Risk Parity: A Factor Based Analysis of Asset Based Risk Parity”, Vineer Bhansali, Josh Davis, Graham Rennison, Jason Hsu and Feifei Li examine the essential return and risk drivers… Keep Reading

How can equity weighting strategies and their opposites both outperform the stock market? In the October 2012 version of their paper entitled “The Surprising ‘Alpha’ from Malkiel’s Monkey and Upside-down Strategies”, Rob Arnott, Jason Hsu, Vitali Kalesnik and Phil Tindall challenge beliefs underlying a variety of stock investment strategies that beat a capitalization-weighted benchmark by examining… Keep Reading