Investing Research Articles

How effectively and consistently do equities, bonds, oil, gold and the dollar serve as hedges and safe havens for each other? In their September 2010 paper entitled “Hedges and Safe Havens – An Examination of Stocks, Bonds, Oil, Gold and the Dollar”, Cetin Ciner, Constantin Gurdgiev and Brian Lucey investigate pairwise hedging and safe haven… Keep Reading

What are the implications for investors of a trend toward strategic and tactical allocation to index proxies (exchange-traded funds and derivatives) rather than individual securities? The July 2010 paper entitled “On the Economic Consequences of Index-Linked Investing” by Jeffrey Wurgler provides an overview of the effects of index-linked investing on stock prices, risk-return trade-offs, investor… Keep Reading

How well do calendar-based anomalies, such as the January and Halloween/Sell-in-May effects, hold up for data extending back three centuries? Do any new anomalies emerge from such a data set? In their October 2010 paper entitled “Are Monthly Seasonals Real? A Three Century Perspective”, Ben Jacobsen and Cherry Zhang examine an extremely long record of… Keep Reading

Market capitalization is the most frequently used metric for weighting the individual stock components of market indexes. Other approaches range from equal weighting to weighting on firm fundamentals to weighting generated by return-risk optimization. How do such alternative metrics work empirically? In the October 2010 draft of their paper entitled “A Survey of Alternative Equity… Keep Reading

Academic tests of momentum generally involve frequent adjustments to portfolios of many stocks, such that trading frictions and shorting/capacity restrictions make implementation impractical for both large and small investors. Are there simplified approaches that successfully shed trading frictions faster than momentum returns? In the October 2010 version of their paper entitled “Feasible Momentum Strategies in… Keep Reading

The conclusion of “10-Month SMA Timing Signals Over the Long Run” is that 10-month simple moving average (SMA) timing signals (with current price above/below its 10-month SMA viewed as bullish/bearish) are mostly beneficial over the long run. However, this study involves complex modeling assumptions that limit confidence in its conclusion. How well do 10-month SMA… Keep Reading

Do investors think differently about winning and losing positions? In their paper entitled “Why Do Investors Update Reference Prices Asymmetrically?”, Susan Grant, Ying Xie and Dilip Soman conduct four laboratory experiments to investigate differences in thought processes engaged by individual investors experiencing winning and losing investments. Using results of experiments involving 60-95 university students (mostly… Keep Reading

Is beta an effective tool for selecting exchange-traded funds (ETF)? In their October 2010 paper entitled “Black Swans, Beta, Risk, and Return”, Javier Estrada and Mari­a Vargas investigate the usefulness of beta as a metric for constructing portfolios of country and industry ETFs. They use the MSCI world market index (consisting of developed markets only… Keep Reading

Does high-frequency trading amplify noise and thereby reduce the signal-to-noise ratio in stock returns? In his August 2010 paper entitled “The Effect of High-Frequency Trading on Stock Volatility and Price Discovery”, Frank Zhang examines the effect of high-frequency trading on stock price volatility and on incorporation of fundamental news into price. He defines high-frequency trading… Keep Reading

Conventional wisdom is that company management can maximize stock price by issuing weak guidance for future earnings that sets low expectations, and then reporting earnings that beat the low expectations. Does evidence support this belief? In their September 2010 paper entitled “The Stock Price Effects from Downward Earnings Guidance Versus Beating Analysts’ Forecasts: Which Effect… Keep Reading