Investing Research Articles

…the small positive alpha of hedge funds in aggregate is likely to move toward the negative alpha of the mutual fund industry in the coming years.

Is aggregate investor sentiment a useful trading indicator? For what kinds of stocks is sentiment trading most likely to work? In their December 2006 paper entitled “Investor Sentiment in the Stock Market”, Malcolm Baker and Jeffrey Wurgler summarize a top down approach to addressing these questions, focusing on the measurement of aggregate sentiment and its… Keep Reading

When the market trend challenges their beliefs, what do we hear from market “experts?”

The Financial Forecast Center (FFC) forecasts the average value by month for the S&P 500 index for the current month and the next five months , including fairly large error ranges for 50% and 90% confidence levels. FFC’s “forecasts are generated in-house using artificial intelligence. The forecast models are 100% quantitative and use a global,… Keep Reading

…the authors find that both market friction and investor irrationality play substantial roles in the pricing of stocks.

…commodity futures in aggregate offer a long-term return comparable to that of stocks, with less downside risk and a substantial diversification benefit for a stock/bond portfolio.

…is fear as a sales pitch.

…the Fed model and the long-term P/E mean reversion model are complementary perspectives on return prediction, with the former reasonably useful for forecasting up to three years into the future and the latter applicable over longer horizons.

How well do commonly used valuation multiples align with actual stock prices? In their January 2007 paper entitled “Multiples and Their Valuation Accuracy in European Equity Markets”, Andreas Schreiner and Klaus Spremann investigate the accuracy of the valuation multiple method in general and the properties of 50 different multiples (see the figure below). They define… Keep Reading

…this review of mutual fund studies makes low-cost, broad market exchange traded funds sound good.