Can Predictable Patterns in Market Returns be Exploited Using Real Money?

@inproceedings{Malkiel2004CanPP,
  title={Can Predictable Patterns in Market Returns be Exploited Using Real Money?},
  author={Burton Gordon Malkiel},
  year={2004}
}
  • B. Malkiel
  • Published 31 January 2004
  • Economics, Business
Academic studies suggest stock market prices are to a considerable extent predictable. Investors tend to earn higher returns when the market sells at relatively low price-earnings multiples and high dividend yields. Value stocks supposedly outperform growth stocks, and smaller companies produce higher returns than larger firms. Moreover, buying losers over the past several years supposedly trumps a strategy of buying recent winners. In fact, investment strategies undertaken with real money… 
Cash Position Forecasts and Stock Market Portfolio Returns
Several articles in highly regarded news outlets over the last decade have argued that firms holding relatively more cash are favored by investors. The contention is those firms holding cash will
When to Time in the Stock Market: An International Examination of Factors that Influence Market Timing
The objective of this study is to determine if readily available finance and macro-economic variables can explain which years have favored market timing strategies versus which years favored buy and
Northern Exposure: How Canadian Micro-Cap Stock Investments Can Benefit Investors
Micro-cap stocks, a subset of small stocks, have the potential to provide additional diversification benefits and increased returns to investors. The ways that micro-cap stocks can contribute to
Idiosyncratic volatility as an explanation of the small firm effect: Australian evidence
In the context of Australian stockmarkets, we examine how a company’s size and stock idiosyncratic volatility relate to return performance. The paper’s main conclusions may be summarized as follows.
The Mathematics of Idiosyncratic Volatility and the Small Firm Effect: Australian Evidence
In the context of Australian stockmarkets, we examine the relationship between a stock’s return performance, the stock idiosyncratic volatility, and the firm’s market capitalization. The paper’s main
Do residual earnings price ratios explain cross-sectional variations in stock returns?
Purpose - – Variations in price/earnings (P/E) ratios are explained in a rational expectations framework by a number of fundamental factors, such as differences in growth expectations and risk. The
The Evolving and Relative Efficiencies of Stock Markets: Empirical Evidence from Rolling Bicorrelation Test Statistics
The present paper utilizes the portmanteau bicorrelation test statistic of Hinich (1996) in a rolling sample approach to capture the evolution of market efficiency over time. The proposed framework
Impact of Cash Holdings on Investment Value
This paper has been revised into one subsequent SSRN working paper and another paper in progress.Popular press has argued that firms holding cash should be regarded highly by investors because firms
The Cross-Sectional Dispersion of Stock Returns, Alpha, and the Information Ratio
Both the cross-sectional dispersion of U.S. stock returns and the VIX provide forecasts of alpha dispersion across high-performing and low-performing portfolios of stocks that are statistically and
Computation of the Ex-Post Optimal Strategy for the Trading of a Single Financial Asset
In this paper we explain how to compute the maximum amount of money one investor can earn in trading a single financial asset under a set of trading constraints. The obtained algorithm allows to
...
...

References

SHOWING 1-10 OF 36 REFERENCES
Valuation Ratios and the Long-Run Stock Market Outlook
The use of price–earnings ratios and dividend-price ratios as forecasting variables for the stock market is examined using aggregate annual US data 1871 to 2000 and aggregate quarterly data for
The Illusory Nature of Momentum Profits
In markets with trading friction, the incorporation of information into market prices can be substantially delayed through a weakening of the arbitrage process. We re-examine the profitability of
Do Investors Trade Too Much?
This paper takes a first step towards demonstrating that overall trading volume in equity markets is excessive, by showing that it is excessive for a particular group of investors: those with
Permanent and Temporary Components of Stock Prices
A slowly mean-reverting component of stock prices tends to induce negative autocorrelation in returns. The autocorrelation is weak for the daily and weekly holding periods common in market efficiency
The Cross‐Section of Expected Stock Returns
Two easily measured variables, size and book-to-market equity, combine to capture the cross-sectional variation in average stock returns associated with market 3, size, leverage, book-to-market
Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors
Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading. Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those
...
...