Investing Research Articles

Why does the gross profitability stock-screening strategy work? In their December 2013 paper entitled “Factoring Profitability”, Michael Branch, Lisa Goldberg and Ran Leshem explore the drivers of the gross profitability strategy for U.S. stocks. Specifically, they examine the contributions of factors in the conventional Fama-French-Carhart four-factor (FFC4) model of equity returns and the Barra USE4… Keep Reading

What market conditions make stock price momentum strategies crash? In the October 2013 version of their paper entitled “Momentum Profits, Market Cycles, and Rebounds: Evidence from Germany”, Martin Bohl and Marc-Gregor Czaja analyze performance statistics for both price and earnings momentum portfolios of German stocks across different market states. They use a stock price momentum… Keep Reading

Here is this Friday’s installment of Avoiding Investment Strategy Flame-outs, a short book we are previewing for subscribers. Chapter previews will continue for the next two Fridays. Chapter 7: “Thinking about Taxes” “To the extent that governments tax different kinds of income/investment returns (interest, dividends, long-term capital gains and short-term capital gains) differently, taxes may be decisive… Keep Reading

As of the end of 2012, we stopped adding forecasts to the Guru Grades database and published a preliminary report on findings. As of the end of 2013, we have completed the grading of all forecasts added during 2012 and now publish a final Guru Grades report. The final report encompasses 6,582 graded forecasts from 68… Keep Reading

Are momentum and trend-following strategies effective in tactical asset allocation to European equity sectors and countries? In the July 2013 version of their paper entitled “European Equity Investing Through the Financial Crisis: Can Risk Parity, Momentum or Trend Following Help to Reduce Tail Risk?”, Andrew Clare, James Seaton, Peter Smith and Steve Thomas apply momentum… Keep Reading

Here is this Friday’s installment of Avoiding Investment Strategy Flame-outs, a short book we are previewing for subscribers. Chapter previews will continue for the next three Fridays. Chapter 6: “Modeling at the Portfolio Level” “Evaluating strategies based only on trade-level performance, as often presented by trading advisory (“education”) services, may mislead. Some strategies concentrate opportunities, at times… Keep Reading

Do firm efforts to pay shareholders directly (via dividends) and indirectly (via share repurchases and paydown of debt) translate to stock outperformance? In their May 2012 paper entitled “Enhancing the Investment Performance of Yield-Based Strategies”, flagged by a subscriber, Wesley Gray and Jack Vogel compare aggregate performance statistics of stocks ranked by the following four progressively… Keep Reading

How do value and momentum interact with each other and with size, economic and liquidity factors worldwide? In the November 2013 version of their paper entitled “Size, Value, and Momentum in Developed Country Equity Returns: Macroeconomic and Liquidity Exposures”, Nusret Cakici and Sinan Tan address this question for developed markets. They use long-short, factor-sorted portfolios to measure… Keep Reading

Here is this Friday’s installment of Avoiding Investment Strategy Flame-outs, a short book we are previewing for subscribers. Chapter previews will continue for the next four Fridays. Chapter 5: “Checking for Market Adaptation” “The market is a complex system with many interacting parts, and external influences. As in other social settings, there are two aspects to market… Keep Reading

Does the limited supply of lendable shares substantially inhibit successful short selling? In the November 2013 draft of their paper entitled “In Short Supply: Equity Overvaluation and Short Selling”, Messod Beneish, Charles Lee and Craig Nichols examine the profitability of shorting U.S. stocks based on the supply of shares available for lending. They note that the… Keep Reading