Investing Research Articles

...the average investor in the U.S. equities will have difficulty avoiding relatively poor returns during the summer. They should focus on the winter months.

...while changes in bond yields have short-term effects on stock prices, valuation ratios better forecast long-term stock market behavior.

...the quality (more than the quantity) of emerging earnings moves corporate officers to adjust repurchasing and personal trading of company stock.

...individual investors can look at their own trading patterns for clustering to assess whether they act like big picture or little picture traders.

...while there is a weak negative correlation between aggregate downward earnings guidance and monthly stock market returns, the stock market probably leads the guidance.

...excess returns of the higher-priced stocks entering the Regulation SHO threshold list merit some consideration.

...picking through the stocks leaving the Regulation SHO threshold lists may be worthwhile.

...very recent data suggests that short sellers on average are contrarians who predict (or trigger?) near-term stock price underperformance. However, the underperformance is economically insignificant due to transaction and carrying costs.

...the disposition effect may serve as the bootstrap of momentum investing by retarding the impact of good (bad) news for stocks with large unrealized capital gains (losses).

...a very good introduction to a range of investment styles for new (but diligent) investors and a refresher for experienced ones.

...momentum investing works, driven partly by reward for the risk of the unusual but transitory sensitivity of high-momentum stocks to overall economic growth.

...stock analysts exhibit predictable underreactions in revising earnings forecasts. The degree of underreaction increases with the earnings forecast dispersion.

...momentum investing works, and abnormalities in the distribution of returns for momentum-driven portfolios may partly explain why.

...research results indicate that Regulation FD has leveled the playing field for all investors, and reduced the accuracy of sell-side analyst earnings forecasts.

...company-specific news tends to decouple stock price behavior from the market, while the absence of news promotes co-movement.

...stock pickers tend to be optimists who should focus on objectivity in assessing the outcomes of their stock picking.

...the active management component of broadly diversified (closet index) mutual funds is generally expensive and ineffective. In comparison, hedge funds with 100% active management are not that pricey.

...individual investors tend to limit buying consideration, detrimentally, to those stocks that grab their attention via unusual trading or other news.

...good (bad) macroeconomic news is bad (good) for broad stock indices during expansions and good (bad) during recessions.

...informed traders prefer price certainty over execution certainty unless the value of their private information is about to expire.

...the stock market shows significant predictability (rather than perfect efficiency) in its reactions to news.

In his March 2005 paper entitled “Reconciling Efficient Markets with Behavioral Finance: The Adaptive Markets Hypothesis”, Andrew Lo presents a framework for unifying the Efficient Markets Hypothesis (EMH) and Behavioral Finance. The paper is thoughtful...

...expect single-digit long-term returns from stocks.

...investor sentiment tends to "predict" the past.

...very recent data suggests that short sellers may have lost their ability to predict bad news and stock price declines.