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Articles 121 - 150 of 207

Full-Text Articles in Finance and Financial Management

Google Search, Steven D. Dolvin Apr 2013

Google Search, Steven D. Dolvin

All Chapters

A recent study (See paper here, Nature) finds that the level of searches by particular terms is highly correlated to overall portfolio returns, particularly when trading strategies are based on these terms. The idea is that the search terms are a predictor of trading behavior, whether bullish or bearish.

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Efficient Markets?, Steven D. Dolvin Apr 2013

Efficient Markets?, Steven D. Dolvin

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Market efficiency comprises two aspects. First, markets respond quickly to new information. Secondly, and often overlooked, the market responds accurately to this information. The recent twitter hoax (See article here, USA Today) is just one example of the market responding quickly to new information. Whether it is accurate or not is where the debate rages.

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Circuit Breakers, Steven D. Dolvin Apr 2013

Circuit Breakers, Steven D. Dolvin

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Following the "Flash Crash" in 2010, the SEC implemented new trading curbs. Following continued discussion, these curbs have been updated once again--for both individual stocks and the market as a whole. See this Bloomberg article and this NYSE summary.

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Exit Strategies, Steven D. Dolvin Mar 2013

Exit Strategies, Steven D. Dolvin

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Unfortunately, picking the next winning stock is only half the battle. Many investments have strong gains, but end up losing because investors fail to exit their holdings at the right time. Trailing stop orders are one way to help mitigate this issue. (See article here, Yahoo Finance.)

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History Lesson: Momentum, Steven D. Dolvin Mar 2013

History Lesson: Momentum, Steven D. Dolvin

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We often talk about buying low and selling high, but many individual investors often do the opposite. Particularly in retail accounts and 401(k) plans, investors are often "late to the party," waiting until the market hits a high to reenter. This behavioral bias results in momentum that may drive the market higher, but how long is the key question. Further, investors would be better suited taking a more disciplined periodic investment approach. With the market just hitting a high, this issue is currently at play. (See article here, WSJ.)

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Death Cross For Gold, Steven D. Dolvin Feb 2013

Death Cross For Gold, Steven D. Dolvin

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For technical traders, a death cross is definitely a sell sign. A death cross occurs when a shorter term moving average (such as the 50 day) crosses a longer term moving average (such as the 200 day) to the downside. Gold recently experienced such an event. However, fundamental traders are often at odds with this belief. (See article here, Yahoo Finance.)

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If You Don't Want To Be An Engineer...., Steven D. Dolvin Feb 2013

If You Don't Want To Be An Engineer...., Steven D. Dolvin

All Chapters

Recent surveys suggest that engineers (chemical, mechanical, etc.) are the highest earning undergraduate majors -- most in the $60-65K range. Finance is the next highest, at $57,600. So, it seems you have made a good investment by selecting finance as your major. (See article here, Fox Business / Business News Daily.)

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Bond Portfolio Duration, Steven D. Dolvin Jan 2013

Bond Portfolio Duration, Steven D. Dolvin

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Duration is a measure of the effective maturity of a bond or bond portfolio. A higher duration is indicative of higher price risk, particularly in response to changing rates. Thus, if interest rates rise and bond prices fall, a bond with a higher duration will experience a sharper drop in price. Given the relatively low level of interest rates in the current market, bond investors have moved to lower duration portfolios, as protection against expected increases in rates. (See article here, Wall Street Journal.)

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Increased Leverage = Less Risk?, Steven D. Dolvin Jan 2013

Increased Leverage = Less Risk?, Steven D. Dolvin

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All else equal, the use of leverage increases investment risk. But, can it ever have the opposite effect? Investors using the so-called risk parity trade believe the answer is yes. Under this approach, a portfolio is built using equity and debt, but the debt is purchased using leverage. The strategy is based on two key points: (1) equity is more volatile than debt and (2) debt returns are negatively correlated to equity returns. Thus, with leverage, the debt returns are in effect more volatile. When combined, the negative correlation creates a less risky portfolio as the equity and debt returns …

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R-Squared And Fund Selection, Steven D. Dolvin Jan 2013

R-Squared And Fund Selection, Steven D. Dolvin

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R-squared is the correlation (i.e., r) of a fund to its benchmark index multiplied by itself (i.e., squared). R-squared measures how closely a fund tracks its respective index. A recent article (see here, Wall Street Journal) suggests that investors should search for actively managed funds with low R-squareds, as this suggests the manager is truly trying to add value by concentrating on specific sectors of the benchmark universe. However, doing so increases systematic risk. So, there is a tradeoff.

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Circuit Breakers In Response To Flash Crash, Steven D. Dolvin Jan 2013

Circuit Breakers In Response To Flash Crash, Steven D. Dolvin

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Following the "Flash Crash," the exchanges implemented single stock circuit breakers (in addition to the market-wide constraints that already existed). These new circuit breakers are already under review, with planned changes set to go into effect in April. See article here, Bloomberg.

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Snow Futures?, Steven D. Dolvin Jan 2013

Snow Futures?, Steven D. Dolvin

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Futures contracts are typically viewed as speculative investments; however, much of the activity in such contracts is the result of hedging. For example, insurance companies use weather derivatives to hedge exposure to natural disasters, while farmers and food producers would transact in agricultural futures. The most recent addition to such categories is snow futures. See article here, CME Group.

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Are Hedge Funds Worth It?, Steven D. Dolvin Jan 2013

Are Hedge Funds Worth It?, Steven D. Dolvin

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Hedge funds typically charge high fees for their services -- generally a 2% yearly management fee plus 20% of profits. When this is factored in, most investors would be better off choosing a low cost ETF. See article here, The Economist.

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The Stock Market’S Reaction To Accounting Information: The Case Of The Latin American Integrated Market Abstract, Mauricio A. Melgarejo, Eduardo Montiel, Luis Sanz Jan 2013

The Stock Market’S Reaction To Accounting Information: The Case Of The Latin American Integrated Market Abstract, Mauricio A. Melgarejo, Eduardo Montiel, Luis Sanz

Scholarship and Professional Work - Business

The purpose of this paper is to explore the stock market’s reaction to quarterly financial statements. We focus our study in two countries that are participating in the Latin American Integrated Market (MILA): Peru and Chile. We find that the cumulative abnormal returns and the absolute value of the cumulative abnormal trading are explained principally by the quarterly earnings surprises around the financial statements release date. We find that these effects are more pronounced in small firms, confirming that due to the lower level of pre disclosure information accounting numbers are the main source of information. Key words: Accounting Information, …

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Low Volatility Etfs, Steven D. Dolvin Dec 2012

Low Volatility Etfs, Steven D. Dolvin

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A recent trend is the development of low volatility funds, including both ETFs and mutual. These funds invest in a subset of a specified index, selecting only those stocks with low price volatility (which may be identified by a low beta). There is not sufficient history to gauge the performance of such funds, but two issues are worth noting. First, given the impact of volatility on compounded returns (i.e., geometric averages are lower than arithmetic averages), low volatility funds should have an advantage, particularly in otherwise volatile markets. Second, value funds may outperform over long periods (albeit not every period), …

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Student Loan Debt, Steven D. Dolvin Nov 2012

Student Loan Debt, Steven D. Dolvin

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Obviously real estate was the focus of the recent credit (or subprime) crisis. However, many investors believe that student loan debt, which is also bundled and sold (i.e., collateralized), is the next "crisis" area. Student debt has risen substantially, as has the percentage of borrowers in delinquency. See these two articles: Wall Street Journal and New York Times.

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Insider Trading, Steven D. Dolvin Nov 2012

Insider Trading, Steven D. Dolvin

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Insider trading (i.e., trading on material nonpublic information) is illegal. However, corporate executives are allowed to trade stock in the firms they manage. This is difficult to reconcile since these executives, in all likelihood, have such information. A recent study by the Wall Street Journal found that executives trading ahead of corporate earnings announcements earned substantially higher returns (or avoided substantially lower losses). See article here.

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Fiscal Cliff, Steven D. Dolvin Nov 2012

Fiscal Cliff, Steven D. Dolvin

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There has been much discussion surrounding the impending "fiscal cliff." So, what exactly is this? Well, it is a combination of items that effectively equate to about $600 billion in potential spending cuts and tax increases. This represents about 4% of US GDP. So, failing to address these issues would likely result in a deep, prolonged recession. Read a good summary here, American Action Forum.

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Index Etfs -- Not Created Equal, Steven D. Dolvin Nov 2012

Index Etfs -- Not Created Equal, Steven D. Dolvin

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You might expect that all "Large Cap" ETFs are the same, as they would likely track the S&P500 index. However, in an effort to reduce costs, many ETF providers (such as Vanguard) are replacing the standard index with others that charge lower licensing fees. This allows the providers to either reduce the expenses they charge or increase operating margins. As providers make this switch, it could also impact the underlying holdings to the extent that differences occur across the indexes. See article here, Wall Street Journal.

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"Alternative" Alternative Investments, Steven D. Dolvin Oct 2012

"Alternative" Alternative Investments, Steven D. Dolvin

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Typical Alternative Investments include such categories as commodities and real estate. However, some investors have branched out into more esoteric assets such as cars and collectibles. As such, there is a growing category of managers offering such funds. See the article here, Wall Street Journal.

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Apple: Head And Shoulders, Steven D. Dolvin Oct 2012

Apple: Head And Shoulders, Steven D. Dolvin

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In technical analysis, traders look for patterns in stock prices, which they then use to determine buy/sell decisions. One such pattern is the "head and shoulders," which, as the name suggests, is two small peaks, with a larger one in the middle. Such a pattern is often considered bearish, particularly if the price breaks through the "neckline." Unfortunately (or not, depending on your view of technical analysis), Apple's share price recently exhibited this pattern. See the article here, Yahoo.

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Rogue Trader, Steven D. Dolvin Sep 2012

Rogue Trader, Steven D. Dolvin

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On June 30, 2009, the price of oil jumped $1.50 per barrel during the night. This was curious since no major political event had taken place. Well, the Financial Services Authority just released a report that a drunk trader purchased futures contracts on 7 million barrels, which pushed the price up. Even more ironic, the trader was so drunk he didn't even remember doing it. See article here, CNBC.

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Futures Exchanges, Steven D. Dolvin Sep 2012

Futures Exchanges, Steven D. Dolvin

All Chapters

Most people are familiar with the primary futures exchanges, such as the CBOT, CME, and the NYMEX (all part of the CME Group). However, there are some more specialized (and interesting) exchanges. For example, check out Intrade, which is a futures market based on political outcomes. Also, you can invest based on Hollywood movies ().

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High Yield Debt, Steven D. Dolvin Sep 2012

High Yield Debt, Steven D. Dolvin

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High Yield Debt is a nice way of saying "junk" debt, i.e., debt that is considered speculative grade. As you would expect, the yield on such debt, due to higher default risk, is higher than standard investment grade debt. However, with historically low interest rates, even the yields on "high yield" debt don't look so high any more. See article here, International Financing Review.

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Short Squeeze, Steven D. Dolvin Aug 2012

Short Squeeze, Steven D. Dolvin

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Short interest may be considered an indicator of overall market sentiment regarding a stock, with high short interest being bearish. However, if short sellers rush to cover their positions, a so-called "short squeeze," the price of the stock may increase substantially. This is what recently happened with Pandora stock. See the article here, Pandora.

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Plan Now, Steven D. Dolvin Aug 2012

Plan Now, Steven D. Dolvin

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Almost half of all retirees have $10,000 or less in savings when they die. While social security or pensions may provide adequate income, it illustrates the dependence on these outside sources. Going forward, there will be fewer pension plans (switching to defined contribution plans), and social security is no guarantee. So, plan now. .

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Media = Contrarian Indicator, Steven D. Dolvin Aug 2012

Media = Contrarian Indicator, Steven D. Dolvin

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The media often focuses on financial stories; however, they tend to be late to the game. Meaning, once they report on an event, the market has likely already digested it. Recently, Bespoke Investment Group found that the number of financial stories posted on the Drudge Report was negatively correlated to the subsequent market performance. See the article here, Yahoo.

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Weather Derivatives, Steven D. Dolvin Aug 2012

Weather Derivatives, Steven D. Dolvin

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Most people are aware of stock options or futures contracts on commodities such as gold and oil. However, the derivatives market is very diverse, including such things as weather derivatives. With hurricane season upon us, you may want to do some research on hurricane futures and options (http://www.cmegroup.com/trading/weather/hurricanes/hurricane.html). Essentially, these contracts allow insurers to transfer risk to other parties, such as hedge funds. See the article here, CME Group.

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Investor's Pain = Government's Gain, Steven D. Dolvin Aug 2012

Investor's Pain = Government's Gain, Steven D. Dolvin

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In the wake of the Crash of 2008, the government stepped in to bail out multiple institutions, including AIG. Following the economic recovery (albeit a moderate one), the government was able to exit its position, netting a $17.7 billion gain. So, while many people opposed the bailout, it actually served as a transfer from investors (generally considered the wealthy) to the government. See article here, LA Times.

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Short Sale Trading Glitch, Steven D. Dolvin Aug 2012

Short Sale Trading Glitch, Steven D. Dolvin

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Following the Crash of 2008, the SEC reinstated the uptick rule, albeit a modified version. The uptick rule kicks in if a stock's price drops 10% in one day. This prevents short selling except on an uptick. However, a trading glitch (which are increasingly common) effectively overlooked the rule. .

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