Key Points Stock selection in the stock market is not easy and requires effort Shorting stocks as a strategy may not always work Shorting low-quality and high-volatility stocks yields negative returns Highly leveraged financial firms saw their stock prices soar after the global financial crisis Stocks with poor features have certain relationships and correlations Combining multiple lousy features in stock … Read More

Key Points: While some researchers have questioned the significance of the size factor in investment portfolios, there are valid reasons to consider its relevance. Assessing the impact of the size factor on a portfolio requires a comprehensive analysis that takes into account risk characteristics and correlations with other factors. Evidence suggests that integrating exposure to the size factor can improve … Read More

Income inequality may be a hidden driver of equity prices. In a very equal society, equities are less in demand as the need for shelter and consumer goods trumps the need to own stocks. Rising income inequality mechanically drives equity demand up and with it, returns. The 40-year secular bull market can be explained by strong demand growth fueled by … Read More

Investing in yourself is the ultimate investment as nobody can take away what you have within yourself. 10 individuals from different backgrounds and cultures share their stories and perspectives on how they invest in themselves. Investing in your body, finding the right balance, and making daily exercise a priority are some ways to invest in yourself. Investing in education and … Read More

Key Points: Factor selection is crucial when building financial models. Machine learning (ML) and data science can assist in factor discovery and creation. Factors should be economically meaningful and distinct to avoid multicollinearity. ML models do not require the same strict assumptions as traditional regression models. Selecting economically intuitive factors can enhance ML model outputs and provide greater clarity. Factor … Read More

Retirement income projections should incorporate dynamic spending to reflect the realities of retirees’ ability to adapt their spending. Static spending rules often used in retirement income planning tools do not account for changes in spending based on portfolio performance. The funded ratio, a metric used to measure the health of pension plans, can be used to adjust expected spending throughout … Read More

The copper-gold ratio is used by institutional asset managers as a leading indicator for the 10-year Treasury yield. The ratio’s utility may weaken under certain market conditions, particularly related to the US dollar. Copper and gold have negative correlations with the dollar, as a stronger dollar increases commodity prices for non-dollar buyers. The ratio of gold and copper neutralizes the … Read More

Key Points: The FX impact on corporate earnings and guidance is a crucial consideration for both companies and analysts. Many US multinational corporations (MNCs) had poor hedging performance last year, raising questions about effective hedging decisions. Behavioral finance and financial accounting treatments may influence hedging decisions. There is a need to understand the fungibility of FX risk and the different … Read More

Key Points The stock market is often seen as a reflection of the economy, but this is not always the case. The composition of the stock market is different from the components of the economy, with technology, healthcare, and financials being the top sectors in the stock market. There is a correlation between GDP growth and stock market returns in … Read More

– Stock prices are influenced by financially material environmental, social, and governance (ESG) news, particularly positive news that receives significant media coverage and relates to social capital issues. – Research suggests that ESG investors are primarily motivated by financial factors rather than nonpecuniary considerations. – Previous studies have shown mixed results regarding the market’s response to ESG news, but newer … Read More