Investing Research Articles

Is fine wine a good investment? Two recent studies are on the case. In their February 2010 paper entitled “Raise your Glass: Wine Investment and the Financial Crisis”, Philippe Masset and Jean-Philippe Weisskopf examine the risk, return and diversification benefits of fine wine. In their August 2011 paper entitled “Is Wine a Premier CRU Investment?”, Liam Devine… Keep Reading

Analyses such as those described in “Demographic Headwind for U.S. Stock Market?” and “Classic Research: Demography and the Stock Market” assess the impact of demographic changes on the stock market by focusing on market valuation as measured by price-earnings ratio (P/E). What story would a more direct analysis of demographics and stock market returns tell?… Keep Reading

Will disinvestment of the baby boom generation retard U.S. equities? In their August 2011 letter entitled “Boomer Retirement: Headwinds for U.S. Equity Markets?”, flagged by a reader, Zheng Liu and Mark Spiegel revisit the relationship between U.S. age demographics and U.S. equity valuation as indicated by the lagged price-earnings ratio (P/E). They calculate P/E based… Keep Reading

Are financial market returns from extreme outlier days mostly good or bad for investors? Is the occurrence of such days usefully predictable? In his August 2011 paper entitled “Where the Black Swans Hide & The 10 Best Days Myth”, Mebane Faber examines the effects and predictability of daily market return outliers. Using daily returns for the broad… Keep Reading

As described in “Monthly Stock Return Reversal Update”, evidence for a conventional monthly stock return reversal effect since 1990 is weak. Is there a way to enhance the effect? In their August 2011 paper entitled “Short-Term Residual Reversal”, David Blitz, Joop Huij, Simon Lansdorp and Marno Verbeek present a short-term reversal strategy based on deviations of individual… Keep Reading

When do simple moving averages (SMA) serve as useful trading rules? Do they exploit some hidden pattern in asset price behavior? In their July 2011 paper entitled “The Trend is not Your Friend! Why Empirical Timing Success is Determined by the Underlying’s Price Characteristics and Market Efficiency is Irrelevant “, flagged by a subscriber, Peter… Keep Reading

Is the monthly stock return reversal effect currently exploitable? In the August 2011 version of their paper entitled “New Evidence on Short-Term Reversals in Monthly Stock Returns: Overreaction or Illiquidity?”, Chris Stivers and Licheng Sun investigate the persistence, size-sensitivity and seasonality of monthly stock return reversal in the context of three competing explanations: (1) investor overreaction… Keep Reading

Has the strong appreciation of gold since 2001 produced a price bubble? In their March 2011 paper entitled “Is There a Speculative Bubble in the Price of Gold?”, Jedrzej Bialkowski, Martin Bohl, Patrick Stephan and Tomasz Wisniewski measure deviations of actual gold price from its fundamental value to identify gold bubbles. They use the convenience… Keep Reading

What is fair value for gold, which has no earnings and pays no dividend? In their 2005 paper entitled “The Price of Gold: A Global Required Yield Theory”, Christophe Faugere and Julian Van Erlach present a model of gold valuation based on a view of gold as a global store of real (inflation-adjusted) wealth. This model… Keep Reading

Should investors with different horizons prefer different styles (large versus small capitalization and value versus growth)? In their 2010 paper entitled “Time, Risk and Investment Styles”, Zugang Liu and Jia Wang investigate how equity investment style risks vary with investment horizon. They focus on the downside of asset returns rather than overall volatility to measure risk, arguing… Keep Reading