This Overlooked Ratio, Large Funds And Hedge Funds Can't Use, Gives You Higher Returns

Do you think the value of a company’s shares traded on the stock market can have an impact on your investment returns?

Unusual research paper

I didn’t, but that changed when some time ago I read an interesting research paper called Liquidity Styles and Strategies in U.S., International and Global Markets written by Professor Roger Ibbotson and Wendy Hu.

What it found

The paper found that liquidity (defined as the number of yearly shares traded divided by the company’s total outstanding shares) is a strong predictor of future returns in the USA and international markets.

Low liquidity outperforms the market

The paper tested...