> Almost every instrument is mean-reverting on short timelines and trending on longer timelines.
i.e. he confirms the momentum factor, which isn't surprising since there's more solid evidence for it than anything else, going back hundreds of years.
He doesn't say what fundamental factors he looked at, so it's possible that value, size, and profitability/quality would hold up as well. All those have been studied pretty extensively in academia, in papers going back decades. The author took only a fairly random sampling of recent papers.
All the finance folks I know use "fundamentals" to mean some class of attributes, that they all know what they are. Like when I say "GPL3" to someone who has a-priori knowledge.
Not exactly sure but I think the "fundamentals" are top-line revenue, unit cost, unit margin, yoy-growth, EBTDA, cash-on-hand, default-alive - and likely the ratios those values produce.
These sort of papers don't look at all the fundamentals at once. They'll isolate one factor, or a small related group, and see if it's predictive.
Two simple factors that are well supported: on a risk-adjusted basis, stocks of small companies do better than big ones, and value stocks do better than growth stocks. ("Value" means the stock is cheap relative to some simple fundamental measure like the company's book value.)
A simpler way to think of it is any data that comes off the Income Statement, Balance Sheet, or Cash Flow Statement - or can be directly calculated using such data.
Please don't downvote this comment. There's a huge difference between short term trading and investing. And yes for short term trading (minutes/hours/few days) fundamentals matter rather litte - after all you can be a successful trader of Bitcoin, which has pretty much no fundamentals. Except on volatility events like macro data releases, earnings, FED decisions, surprise news (looking at you GE) etc.
Having a small impact is not the same a having zero impact.
Traders operate over longer timeframe even if they are holding an individual stock for minutes there is a limited pool of stocks. Keep playing the game and longer term impacts add up.
But do the fundamentals of an individual investment matter in the short term compared to the fundamentals of the market as a whole? I would suspect that the “longer term impacts add[ing] up” would just be market health. Day-trading randomly-picked stocks with random buys and sells is a Markov approximation of an index fund :)
I think that depends on how stocks are chosen when you are day trading. Limiting things to high volatility stocks for example creates a bias in your index fund approximation.
I know as little about this as you do; my own gathering is that “fundamentals” are any signal you can get from a public company’s mandated quarterly reporting. So, every piece of data on the published balance sheet, plus maybe any reported board actions.
> Almost every instrument is mean-reverting on short timelines and trending on longer timelines.
i.e. he confirms the momentum factor, which isn't surprising since there's more solid evidence for it than anything else, going back hundreds of years.
He doesn't say what fundamental factors he looked at, so it's possible that value, size, and profitability/quality would hold up as well. All those have been studied pretty extensively in academia, in papers going back decades. The author took only a fairly random sampling of recent papers.