Investing Research Articles

Tim Wood, who maintains the “Cycles News & Views” web site, requested that we remove the review of his public stock market forecasts. His rationale is as follows:

...evidence suggests that investors may be able to enhance stock buyback signaling by focusing on firms with relatively low insider ownership.

A reader suggested that we evaluate the forecasting prowess of Bill Gross, manager for PIMCO of the world’s largest bond fund. PIMCO describes itself as “one of the largest specialty fixed income managers in the...

...stock betas calculated from historical data vary considerably over short intervals, across calculation methods and across data sources and therefore may be of little or no value as an investment tool.

...evidence indicates that short sellers are on average able to identify both overvalued and undervalued stocks. Investors/traders may be able to exploit the economically large positive future returns of lightly shorted stocks with simple long-only...

...evidence indicates that many sentiment indicators add little or no value to simple price action indicators, but VIX purified of price action contains significant predictive power for future stock market returns. However, price action masks...

What aggregate return thresholds are critical to investors in deciding whether to accept or reject equity and bonds for investment portfolios? In their December 2008 paper entitled “A Required Yield Theory of Stock Market Valuation...

...evidence suggests that the fear-driven gap between option-implied volatility and contemporaneous realized volatility for a broad stock market index may offer investors/traders a small edge in anticipating near-term stock and bond returns.

Do the stock recommendations of guru Jim Cramer on CNBC’s Mad Money move the market? Do they beat the market? In their May 2009 paper entitled “Investing in Mad Money: Price and Style Effects”, Paul...

...limited evidence suggests that simple trend conditions may amplify return anomalies related to the turn of the month and options expiration. As usual monthly variability is fairly large compared to differences in means for monthly...

...the Common Sense buy-low/sell-high strategy appears not to be an effective asset allocation approach because it is somewhat out of phase with momentum and value return horizons.

...a very limited test suggests that adding simple moving average signals to asset class momentum investing may enhance returns.

...limited evidence suggests that the stock market forecasting accuracy rate of a reasonably diversified group of experts is roughly stable over time at close to 50-50.

...simple analyses suggest that the TOTM effect may help reduce the loss frequency and average in-the-money expiration loss for selling index put options.

...investors may be able to predict which stocks are headed for substantial declines the next year as management efforts to keep the the price propped up fail.

How many stocks within an equity fund manager’s portfolio represent truly “passionate” (high-conviction) picks? Do passionate picks outperform the diversifying “fillers” in the portfolio, and the market in general? In the March 2009 version of...

...limited evidence suggests that investors who rely on fundamental valuation should consider using comparables (valuation multiples) based on harmonic means of several years of historical data as forecast drivers.

The intended characteristics of leveraged and inverse exchange-traded funds (ETF) are obvious. Do they have unintended characteristics that may make them unsuitable for some investors? In their April 2009 paper entitled “The Dynamics of Leveraged...

Do individual investors who trade equity options do better or worse than those who do not? In their October 2008 paper entitled “Option Trading and Individual Investor Performance”, Rob Bauer, Mathijs Cosemans and Piet Eichholtz...

What kinds of returns do options traders actually achieve? In their January 2009 paper entitled “Investor Trading Behavior and Performances: Evidence from Taiwan Stock Index Options”, Bing Han, Yi-Tsung Lee and Yu-Jane Liu examine trading...

...a long options collar on a broad ETF generally outperforms the ETF over the past decade, and a return decomposition indicates that it also outperforms the ETF with protective puts.

...very limited evidence shows that the actual leverages of leveraged ETFs vary considerably from their short-term design values over extended holding periods.

...Outliers presents transformations of context to explain, retrospectively, why (positive) outliers in human performance are not really outliers but rather logical results of a "patchwork of lucky breaks and arbitrary advantages." The book offers no...

...evidence suggests that equity index options carry a price premium because of their value in hedging against shocks to return correlations among individual stocks. Options for individual stocks do not carry this premium.

...modeling suggests that sharp jumps in stock market volatility drive investors to overprice some equity index options, most consistently out-of-the-money put options.