In an influential 1993 paper Narasimhan Jegadeesh, now a professor at Emory University, showed that a so-called zero cost strategy of buying stocks with the best six-month performance and shorting stocks with the worst six-month performance returned 12% a year.
The worst return got a score of zero, and all the other stocks were somewhere in between.
Stocks are currently being supported by zero interest rates and easy money.
As yields on stocks and bonds continue to hover near zero, pension funds and retail investors are diving headfirst into the murky, rocky end of the investment pool: hedge funds.
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First, the continuation of low dividend and capital gains taxes that had investors flocking in the high-dividend paying stocks and hot technology stocks, as an alternative to near zero money market and CD rates.
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The Calculation: To quantify the data, I measured each of those four statistics (YTD return, number of up days, standard deviation, and maximum drawdown) against all other stocks and gave them a score from zero to 100.
Dividend stocks have been all the craze in an environment of zero-yielding Treasuries and uncertain market performance.
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Stocks surged again on Tuesday and with a near-zero cost of borrowing, the dollar remains a favored tool in the carry trade, which naturally weighs on its worth.
The answer is shockingly simple: By holding interest rates at or near zero for so long, the Fed has been forcing seniors to switch to riskier investments like stocks and mutual funds just to maintain their standards of living.
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