Investing Research Articles

Would someone who knows tomorrow’s financial headlines today be a good day trader? In their September 2024 paper entitled “When a Crystal Ball Isn’t Enough to Make You Rich”, Victor Haghani and James White report results of “The Crystal Ball Challenge.” They ask 118 young adults trained in finance to trade the S&P 500 Index… Keep Reading

Below is a weekly summary of our research findings for 10/7/24 through 10/11/24. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Is momentum a rational firm earnings growth proxy rather than a manifestation of investor underreaction/overreaction to news? In their August 2024 paper entitled “A Unified Framework for Value and Momentum”, Jacob Boudoukh, Tobias Moskowitz, Matthew Richardson and Lei Xie present an asset pricing model that treats value and momentum as complementary inputs to a present… Keep Reading

What variables best explain increases and decreases in Cyclically Adjusted Price-to-Earnings ratio (CAPE or P/E10)? In their August 2024 paper entitled “Analyzing Changing ‘Investor Exuberance’: The Determinants of S&P Composite Index Total Return CAPE Changes”, C. Krishnan, Jiemin Yang and Xiyao Tan apply the following three techniques to investigate which of 42 potentially explanatory variables… Keep Reading

How consequential are trading frictions for equity options, and how do these frictions vary across brokers? In their September 2024 paper entitled “Some Anonymous Options Trades Are More Equal than Others”, Xing Huang, Philippe Jorion and Christopher Schwarz compare retail option trade executions by placing the same orders across six brokers: E*Trade, Fidelity, Robinhood, Schwab,… Keep Reading

Why have stock return anomalies generally degraded over recent decades? In their August 2024 paper entitled “What Drives Anomaly Decay?”, Jonathan Brogaard, Huong Nguyen, Tālis Putniņš and Yuchen Zhang examine why stock return anomalies decay by: Decomposing returns into market-wide, public firm-specific and private firm-specific elements. Separating cash flow and discount rate effects within each… Keep Reading

Below is a weekly summary of our research findings for 9/30/24 through 10/4/24. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Do changes in the Effective Federal Funds Rate (EFFR), the actual cost of short-term liquidity derived from a combination of market demand and Federal Reserve open market operations designed to maintain the Federal Funds Rate (FFR) target, predictably influence the U.S. stock market over horizons up to a few months? To investigate, we relate smoothed (volume-weighted median)… Keep Reading

Can machine learning exploit interactions between many equity factors and many potential factor return predictors to create an attractive factor timing strategy? In their August 2024 paper entitled “Optimal Factor Timing in a High-Dimensional Setting”, Robert Lehnherr, Manan Mehta and Stefan Nagel apply machine learning with mean-variance optimization to time equity factors when the numbers… Keep Reading

…data from the past 41 years indicate little or no contemporaneous relationship between the equity market and the residential real estate market. There may be a weak, inverse, multi-year relationship between home appreciation and stock returns.