When people talk about bubbles, the story is usually psychological. Investors get euphoric, abandon discipline, extrapolate recent returns, and eventually panic. This narrative goes back at least to Kindleberger’s Manias, Panics, and Crashes and remains the default explanation in both the media and policy circles. Even Eugene Fama, in his Nobel lecture, framed bubbles as […]

Since 1950 the average daily return on the S&P 500 has been about 0.0368% which annualizes to just about 8% a year And that is a good reward for doing nothing. But we have written several times, that a disproportionate amount of the S&P return is realized around holidays. Christmas gives another example of this […]

One of the enduring myths in finance is that markets are ruthlessly efficient, powered by sober institutions running disciplined processes. The reality, as the paper “The Morning After: Late-night TV and the Stock Market” by Cheema et al (available on SSRN), is that sometimes the only thing moving the S&P 500 is Stranger Things dropping […]

The Hindenburg Omen has always enjoyed more fame than it deserves. Dramatic name, dramatic narrative, dramatic history reference. Perfect for CNBC chyrons and breathless newsletters. The trouble is that once you strip away the branding, you’re left with an over-active, under-informed market breadth alert that mistakes normal internal turbulence for impending catastrophe (An aside: the […]

(Gobble, Gobble) Calendar anomalies are great. All you need to trade them is a reminder in an email app. But because of this, they tend to diminish over time more than other signals. However, they still exist, and it is time to give thanks for a specific one: the Thanksgiving Effect.   The Numbers Let’s […]