Investing Research Articles

How do individual investors respond to an offer of free, unbiased investment advice? In their August 2010 paper entitled “Is Unbiased Financial Advice To Retail Investors Sufficient? Answers from a Large Field Study”, Utpal Bhattacharya, Andreas Hackethal, Simon Kaesler, Benjamin Loos and Steffen Meyer evaluate the responses of 8,195 randomly selected active and likely self-directed… Keep Reading

Studies of leveraged exchange-traded funds (ETF), such as those summarized in “The Unintended Characteristics of Leveraged and Inverse ETFs” and “The Performance of Leveraged ETFs over Extended Holding Periods”, find that the frequent rebalancing actions necessary to maintain targeted leverage substantially affect long-term performance. A reader observed: “I’ve read so many articles about how the… Keep Reading

Does short-term (one-month) stock return reversal persist? If so, is there a best way to refine and exploit it? In their March 2012 paper entitled “Short-Term Return Reversal: the Long and the Short of It”, Zhi Da, Qianqiu Liu and Ernst Schaumburg decompose the total short-term reversal into an across-industry component (long prior-month loser industries… Keep Reading

Does the effectiveness of momentum investing vary with market state? In the October 2011 version of their paper entitled “Market Cycles and the Performance of Relative-Strength Strategies”, Chris Stivers and Licheng Sun investigate how market cycles (bull versus bear) affect the profitability of medium-term and long-term relative strength investing strategies. They consider both firm-level and… Keep Reading

Do investors focus on dividends, thereby elevating associated stock prices as ex-dividend date approaches? In the September 2011 draft of their paper entitled “The Dividend Month Premium”, Samuel Hartzmark and David Solomon examine the price behavior of stocks with scheduled quarterly, semiannual and annual dividends during the expected dividend month and around expected ex-dividend dates. Using… Keep Reading

Does the size effect vary with the state of the economy? In his October 2010 paper entitled “The Behaviour of Small Cap vs. Large Cap Stocks in Recessions and Recoveries: Empirical Evidence for the United States and Canada”, Lorne Switzer examines the relative performance of small versus large capitalization stocks around economic peaks and troughs (per NBER… Keep Reading

What is the state of the equity risk premium across global markets? In the October 2011 version of their paper entitled “Equity Premia Around the World”, Elroy Dimson, Paul Marsh, and Mike Staunton update their estimates of equity risk premiums for 19 country markets and a worldwide aggregate relative to both short-term government bills and long-term government bonds… Keep Reading

Past research indicates that returns for stocks associated with share buybacks (secondary offerings) tend to be abnormally high (low) in subsequent years, suggesting that management successfully times the market and investors respond slowly to the timing signal. Do these findings persist in recent data? In their June 2011 paper entitled “The Persistence of Long-Run Abnormal… Keep Reading

Can the forward-looking aspect of the S&P 500 Volatility Index (VIX) amplify technical analysis? In their September 2011 paper entitled “Using VIX Data to Enhance Technical Trading Signals”, James Kozyra and Camillo Lento apply nine simple technical trading rules (three each moving average crossovers, filters and trading range breakouts) to VIX to generate daily trading signals for the… Keep Reading

Do oil price variations reliably affect returns for U.S. industry-level stock portfolios? In the June 2011 draft of their paper entitled “U.S. Industry-Level Returns and Oil Prices”, Qinbin Fan and Mohammad Jahan-Parvar apply several tests to investigate how oil price changes impact stock returns for 49 U.S. industries. They test economic significance by: (1) using a 60-month rolling historical window… Keep Reading