Investing Research Articles

Does aggregate investor sentiment affect the strength of well-known U.S. stock return anomalies? In their January 2011 paper entitled “The Short of It: Investor Sentiment and Anomalies”, Robert Stambaugh, Jianfeng Yu and Yu Yuan explore the interaction of aggregate investor sentiment with 11 cross-sectional stock return anomalies. Their approach reflects expectations that: (1) overpricing of… Keep Reading

Do individual investors actually trade on their stated beliefs? In their February 2011 paper entitled “Do Investors Put Their Money Where Their Mouth Is? Stock Market Expectations and Trading Behavior”, Christoph Merkle and Martin Weber compare quarterly risk and return expectation survey responses to actual trading data and portfolio holdings for a group of self-directed… Keep Reading

Do technical indicators add value to fundamental indicators in assessing broad stock market valuation? In their March 2011 paper entitled “Forecasting the Equity Risk Premium: The Role of Technical Indicators”, Christopher Neely, David Rapach, Jun Tu and Guofu Zhou examine the powers of technical and fundamental indicators to predict stock market returns. They consider 12… Keep Reading

For what kind of stocks does momentum work best? In his March 2011 paper entitled “Growth Options, Idiosyncratic Volatility and Momentum”, Umut Celiker investigates the interactions among valuation (market to-book ratio, arguably a proxy for firm growth opportunities), valuation uncertainty (idiosyncratic volatility) and stock price momentum. For calendar-time analysis, he ranks stocks each month into… Keep Reading

Are some stocks more sensitive to commodity prices than others? If so, is the variation exploitable? In their February 2011 paper entitled “The Stock Market Price of Commodity Risk”, Martijn Boons, Frans de Roon and Marta Szymanowska investigate the cross-sectional variation in stock returns associated with commodity price changes by calculating betas for individual stocks… Keep Reading

In their March 2011 paper entitled “The Shrinking Space for Anomalies”, George Jiang and Andrew Zhang investigate the robustness of ten well-known anomalies by iteratively “shrinking the stock space” in two ways to determine whether and how the anomalies really work. The ten anomaly variables are: size, book-to-market ratio, momentum, two liquidity measures, idiosyncratic volatility,… Keep Reading

What is a financial market anomaly? How can investors determine whether an apparent anomaly is real (economically material)? In his March 2011 book chapter entitled “Perspectives on Capital Market Anomalies”, Mozaffar Khan provides a framework for interpreting academic research on anomalies and evaluating the exploitability of specific anomalies. His context is market efficiency: “Respect for… Keep Reading

Are Chief Financial Officers (CFO) better informed than Chief Executive Officers (CEO) when it comes to trading the stocks of their companies? In their March 2011 paper entitled “Are CFOs’ Trades More Informative than CEOs’ Trades?”, Weimin Wang, Yong-Chul Shin and Bill Francis investigate whether open market trades made by CFOs are better predictors of… Keep Reading

How do widely recognized stock return anomalies (return variations unexplained by asset pricing models) mesh with efficient portfolio selection theory? In their paper entitled “Investing in Stock Market Anomalies”, Turan Bali, Stephen Brown and Ozgur Demirtas examine five prominent stock market anomalies whose existence is robust through time and across markets (size, book-to-market, short-term reversal,… Keep Reading

What accounts for the persistence in diversity of investor beliefs and behaviors? Why does logical inference from common data not drive common attitudes and actions? In their March 2011 paper entitled “Serotonin and Risk Taking: How Do Genes Change Financial Choices?”, Camelia Kuhnen, Gregory Samanez-Larkin and Brian Knutson investigate differences in investing beliefs and behaviors… Keep Reading