Stocks tend to perform unusually well around the end of one month and the beginning of the next. At first glance, the explanation appears almost absurdly simple: the calendar changes. That basic pattern has been documented for decades and across many countries. In “Infrequent rebalancing, risk deferral, and equity returns at the turn of the […]

The 52-week high is one of the strangest reference points in markets because, economically, there is nothing particularly special about it. A stock trading at $80 does not become more valuable because it traded at $100 sometime in the previous year. Yet investors clearly pay attention to old highs, and a large literature suggests that […]

There are two stock markets. One is made of cash flows, discount rates, earnings, margins, inflation, debt, productivity, recessions, and all the other boring things that eventually matter. The other is made of beliefs. Not survey beliefs or what investors say on television. The marginal beliefs embedded in prices. Most of the time, we implicitly […]

“Buy the dip, short the VIX, **** Bitcoin.” – Slightly censored version of a quote from HBO’s “Industry” Few investing phrases are repeated more often than “buy the dip”. Financial television talks about it. Social media treats every market decline as a fire sale. Even advisors can describe corrections as “healthy” because they create buying […]

There is a common, fairly logical story about market efficiency: the more people look at a stock, the more efficiently it should be priced. Attention brings trading, and trading corrects mispricing. Therefore, highly watched stocks should be harder places to find anomalies. QED. (quod erat demonstrandum, for those without the benefit of a classical education.) […]