A new study finds that developed markets are more efficient than emerging markets, but there is no trend towards ever-increasing efficiency, rather efficiency is cyclical.
Tickersense finds that weak jobs report days lead to deteriorating markets throughout the day.
CXO Advisory suggests that:
In summary, past research indicates that there may be a good short-term price trade (but watch out for frontrunning) and a good longer-term volatility play for forced resignation of a CEO with replacement by an outsider.
and taking the advice of spam stock touts is a way to lose big and fast (contrarian play?); they discuss a simple model that explains why market cap weighting, large caps, and high price to book strategies underperform; a paper that finds that stock booms arise from conditions of low inflation and strong economic growth; discuss a paper that concludes technical trading doesn't generally work, but is more likely to be successful on small and illiquid stocks; find that UBS/Gallup investor sentiment is slightly predictive of returns; and hedge funds have a seasonal performance slightly different than the stock market.
Hedge fund strategy definitions.
Brett Steenbarger finds that just a few big trades control the market movement, that moving correlations between market indices can provide bullish signals:
If we look just at times in which the Dow has been up over 1% in the past 10 sessions and the correlation between the Dow and Russell has been under .50 (N = 25), the next five days in the Dow and Russell have been quite bullish. The Dow has averaged a gain of .47% (18 up, 7 down); the Russell has averaged a gain of 1.15% (20 up, 5 down).
discusses what happens after a big buying day:
The implication is that it is common for markets to take a pause after a big buying day. This tends, however, to be a short-term effect; returns are actually moderately superior four days out.
discusses signals from the TIKI (TICK of the Dow) going back to 2004:
The average 10-day correlation between daily TIKI and daily price change in SPY over this period has been .63. When we have a strong TIKI/price correlation (above .80; N = 108), the next ten days in SPY average a gain of .73% (73 up, 35 down). That is significantly stronger than the average 10-day price change in SPY of .26% (397 up, 285 down).
When the TIKI/price correlation is relatively low (below .50; N =133), the next ten days in SPY average a loss of -.41% (57 up, 76 down). That is significantly weaker than the average 10-day performance.
and finds that:
Since 2004 (N = 675 days), when fewer than 150 stocks across all the exchanges are making 65-day highs (N = 69), the next 20 days in the S&P 500 Index (SPY) average a gain of 1.77% (51 up, 18 down)...Since 2004, when we've had 1000 or more 65-day highs (N = 61), the next five days in SPY have averaged a loss of -.03% (30 up, 31 down). That's weaker than the average five-day gain of .12% (372 up, 303 down) for the sample overall. By 20 days out, however, SPY was up on average by .56% (43 up, 18 down)--a very respectable win:loss ratio.
Econophysics discusses hedge funds and the carry trade, and how they've become addicted to this low volatility strategy ripe for blowup.
The forecast for weather derivatives looks bright, with estimates that 30% of the economy is affected by the weather.
Mark Hulbert discusses how a 39-week moving average system (buy when stocks are above, sell below) performs well, but newsletter can't stick to it and suffers.
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