Investing Research Articles

Is aggregate U.S. stock market value sensitive to flows of new funds (inelastic)? In their October 2020 paper entitled “In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis”, Xavier Gabaix and Ralph Koijen analyze aggregate stock market fluctuations in relation to flows of money into and out of stocks by different investor… Keep Reading

Does technology amplify adverse herding among inexperienced investors? In their October 2020 paper entitled “Attention Induced Trading and Returns: Evidence from Robinhood Users”, Brad Barber, Xing Huang, Terrance Odean and Christopher Schwarz test the relationship between episodes of intense stock buying by retail (Robinhood) investors and future returns. Their source for buying intensity is the… Keep Reading

Has growth in the importance of intangible (knowledge) assets versus real assets undermined usefulness of the conventional equity value premium (based only on the latter)? In her September 2020 paper entitled “Intangibles: The Missing Ingredient in Book Value”, Feifei Li explores whether including intangible assets when calculating book value better measures firm fundamental value. She… Keep Reading

A subscriber requested, as in “Combine Market Trend and Economic Trend Signals?”, testing of a strategy that combines: (1) U.S. Economic Policy Uncertainty (EPU) Index, as described and tested separately in “Economic Policy Uncertainty and the Stock Market”; and, (2) U.S. stock market trend. We consider two such combinations. The first combines: 10-month simple moving… Keep Reading

Below is a weekly summary of our research findings for 11/2/20 through 11/6/20. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Do non-professional analysts who publish on Seeking Alpha offer valuable stock-picking advice? In their August 2020 paper entitled “The Cross-Section of Non-Professional Analyst Skill”, Michael Farrell, Russell Jame and Tian Qiu measure skill among such analysts as the hypothetical abnormal return an investor would earn by following reports/recommendations that focus on one common stock over… Keep Reading

A subscriber requested testing of a dual simple moving average (SMA) crossover strategy that holds SPDR S&P 500 (SPY) when its 30-day SMA (SMA30d, using 30 trading days) is above its 9-month SMA (SMA9m) and otherwise holds cash with yield that of 3-month U.S. Treasury bills (T-bills). To investigate, we calculate SPY SMA30d and SMA9m… Keep Reading

Benford’s law states that the probability of the value of the first digit in many naturally occurring samples of numbers, including asset prices, varies inversely with digit magnitude. For example, the number 1 (9) appears as the leading digit about 30% (less than 5%) of the time. For asset prices, deviations from this law typically… Keep Reading

Below is a weekly summary of our research findings for 10/26/20 through 10/30/20. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Is there a way to restore confidence in a value premium? In their September 2020 paper entitled “Resurrecting the Value Premium”, David Blitz and Matthias Hanauer seek a reliable value premium via three adjustments to the conventional high-minus-low book-to-market ratio (HML) metric: Augment book-to-market ratio with three other value signals: earnings before interest, taxes, depreciation… Keep Reading