High quality stocks, defined as companies with high returns on capital, good quality of earnings, and low leverage, has substantial superior investment return predictability. Quality firms as selected by our strategy generate substantially superior returns even though they are significantly larger than the average company in terms of market capitalization. Further, investment returns of high quality stocks are higher than the benchmark even though risk as measured by standard deviations as well maximum drawdowns is lower than the market.
Archives for December 2014
Some interesting reads that caught my eye from the week of December 28, 2014.
We show the current and historical positioning of various market valuation tools and offer evidence suggesting U.S. market valuation is in the caution zone.
Some interesting reads that caught my eye from the week of December 21, 2014.
Do AAII sentiment surveys have predictive ability? In this post, I discuss a model for analyzing AAII sentiment surveys and their role as a sentiment analysis tool.