4th Quarter (2010)

Michael J. Cooper, John J. McConnell and Alexei V. Ovtchinnikov According to Streetlore, as embedded in the adage “As goes January so goes the rest of the year,” the market return in January provides useful information to would-be investors in that the January market return predicts the market return over the remainder of the year… Read more

Thomas K. Philips Financial planners often impress upon their clients the power of compounding by quoting them the Rule of 72: With annual compounding, a dollar invested in an investment account at a constant interest rate of r% per annum grows to two dollars in approximately 72/r years. In this note I show that the… Read more

Dennis R. Capozza and Ryan D. Israelsen This research hypothesizes that in markets where information costs, transactions costs and the economic impact of information can vary widely, we should expect both significant predictability and systematic variation in the predictability. Controlling for other factors, we find that on average, 15-30% of the difference between the stock… Read more

Masahito Shimizu In a performance evaluation, it is important for both sponsors and portfolio managers to estimate the opportunity set of possible performances. In this regard, we investigate the average performance of all possible strategies and how performance varies across strategies. We show that the average is equal to the performance of the equally-weighted rebalancing… Read more