Investing Research Articles

…the Fed Model better describes the behavior of the market P/E over the past forty years than does a mean-reverting model.

…some risk-tolerant investors successfully exploit significant informational advantages by concentrating their portfolios in a few stocks that they know well.

In his December 2004 paper, Jason Hsu shows that: “Cap-Weighted Portfolios Are Sub-optimal Portfolios”. Noting that over $10 trillion are currently invested in passive capitalization-weighted indices, he examines data from 1962-2003 to show that:

…if you consider analyst recommendations when picking stocks, you really should check for investment banking conflicts. Better yet, just ignore the analysts.

…underperformance of high short interest stocks may be limited to those with high levels of informed (non-arbitrage, non-noise) trading.

…the higher the probability that trading in a stock is informed, the greater the size and persistence of stock price movement.

…short selling shocks move stock prices ipso facto. They are news in and of themselves. In the absence of contrary information or reactive strategies, investors should avoid short-shocked stocks.

…this research suggests that investors should be inclined to sell speculative U.S. stocks in late spring and buy them in the fall.

…reasonably isolated attention-grabbing events are opportunities for profitable day trading.

In his June 2004 paper on “What Are Stock Investors’ Actual Historical Returns”, Ilia Dichev examines stock market capital inflows and outflows to determine how well investors really perform compared to buy-and-hold returns. He concludes that: