3/30/06 Book Review - Beyond the Random Walk

By Singal

1. January Effect
- losers sold in Dec, rise in Jan
- winners are not sold in Dec (little selling pressure)
- how to use - sell losers in Jan; or buy winners in dec, not January (Dec 1 or 5 trading days
before Dec 31)

2. Weekend Effect
- stocks rise on friday, drop on monday (short covering?)

3. Short Term Price Drift
- If Price rises on high volume and good announcement (news), price will drift up for 1 month

4. Momentum in Industry Portfolios (rotational trading)
- holding period of 6-12 months
- lookback period of 5, 15, 25 weeks
- holding period of 1, 5 weeks
- 5 week lookback, 1 week holding is best (test this in trade)

5. Mispricing of mutual funds
- not possible (?) w/ erfs and trading restrictions

6. trading by insiders
- need to make rules i.e.
- 6 month window
- sale/purchase (S/P) ratio - exclude outsiders; > 500k shares, no planned sales
- unique insiders
- compare S/P to SI/PI
- buy if no selling, certain ratios met

7. changes to s&p 500
- added firms go up
- dropped firms go down
- buy on announcement; short on effective date

8. merger arb
- buy target; short acquirer

9. Int'l investing and home country bias
- buy for diversification

10. bias in currency forward rates
- short currencies w/ low int rates
- long currencies w/ high int rates

More MoMo

1. buy stocks that have done best over the past 3-12 months and hold 3-12 months
2. 3-5 years, trends reverse
3. for 1 yr after a stock split, abnormal returns