Investing Research Articles

Does the conventional wisdom of avoiding stocks during May through October work in recent years? In their July 2012 paper entitled “‘Sell in May and Go Away’ Just Won’t Go Away”, Sandro Andrade, Vidhi Chhaochharia and Michael Fuerst test the sell-in-May anomaly (or Halloween effect) based on data unambiguously available only after publication of the… Keep Reading

Does P/E10, current real (inflation-adjusted) level of a stock market index divided by associated average real earnings over the last ten years, usefully predict stock market returns for developed stock markets other than the U.S.? In their March 2012 paper entitled “Value Matters: Predictability of Stock Index Returns”, Natascia Angelini, Giacomo Bormetti, Stefano Marmi and Franco Nardini test… Keep Reading

Does P/E10, current real (inflation-adjusted) level of a stock market index divided by associated average real earnings over the last ten years, usefully predict stock market returns for non-U.S. markets? In the July 2012 revision of his paper entitled “Does the Shiller-PE Work in Emerging Markets?”, Joachim Klement assesses the validity of P/E10 as a long-term stock market… Keep Reading

…evidence from simple tests does not support a belief that investor/trader interest in stocks and funds as measured by normalized Google search volumes can help predict future returns.

How effective is technical cloning of hedge funds (attempting to capture a hedge fund’s future returns via a portfolio of liquid assets that empirically replicates the fund’s historical returns)? In the July 2012 version of their paper entitled “Send in the Clones? Hedge Fund Replication Using Futures Contracts”, Nicolas Bollen and Gregg Fisher test whether… Keep Reading

What are the fundamental considerations for portfolio weights and rebalancing rules over the long run? In the July 2012 version of his book excerpt entitled “Dynamic Portfolio Choice”, Andrew Ang elaborates these considerations as derived from two precepts: (1) periodic or conditional rebalancing of the components of a diversified portfolio is foundational to long-term investing;… Keep Reading

How prevalent is earnings manipulation among U.S. public companies? What indications warn investors of the likelihood of earnings manipulation? In their July 2012 paper entitled “Earnings Quality: Evidence from the Field”, Ilia Dichev, John Graham, Campbell Harvey and Shiva Rajgopal explore earnings quality issues based on results of an anonymous survey of public company Chief Financial Officers… Keep Reading

The employment-population ratio (percentage of those age 16 or older who are employed) is arguably a better measure of the U.S.employment situation than either employment or the unemployment rate. Is this series usefully predictive of U.S. stock market behavior in subsequent months, quarters and years? Using monthly seasonally adjusted employment-population ratio data from the Bureau of… Keep Reading

Is equal weighting of diversified portfolio assets good enough, or are mean-variance optimized allocation strategies constructed from asset return and variance forecasts worth the complexities of implementation? In the June 2012 draft of their paper entitled “Market Volatility, Optimal Portfolios and Naive Asset Allocations”, Massimiliano Caporin and Loriana Pelizzon investigate the conditions under which mean-variance optimized… Keep Reading

Does anticipation of Federal Open Market Committee (FOMC) monetary policy announcements move the market? Is any such anticipation permanent? In the June 2012 revision of their paper entitled “The Pre-FOMC Announcement Drift”, David Lucca and Emanuel Moench investigate the effects of FOMC announcements on global equity markets. They focus on the U.S. stock market during the 24-hour… Keep Reading