How can I do stock flipping?

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How do I read what is the most profitable? I want to buy low and sell high. Something called item-flipping.


I’m not able to read (too small) the table. Regardless, I think the question relates to flipping stocks. Admittedly, my expertise is much more in commodity futures markets, but I believe the theory/rationale holds across markets. As such, my response is below. Published research has often suggested that markets are efficient. Fama (1970) proposed the Efficient Market Hypothesis (EMH) which states:

  • Stocks are typically in equilibrium: fairly priced → expected returns = required returns.
  • Stock prices fully reflect all public information → react swiftly to new information.
  • Because fairly and fully priced → should be impossible to outperform the market through expert stock selection (i.e., purchase undervalued stocks or sell stocks for inflated prices) or market timing.

As such, under the EMH only by chance or by purchasing riskier investments can investors possibly obtain higher returns. In a recent paper, Fama and French (2010) show that “the aggregate portfolio of actively managed U.S. equity mutual funds is close to the market portfolio, but the high costs of active management show up intact as lower returns to investors”—a necessary condition for the EMH to hold.

Fama, E.F. 1970. Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance 25(2):383-417.

Fama, E.F. and K.R. French. 2010. Luck versus Skill in the Cross-Section of Mutual Fund Returns. The Journal of Finance 65(5):1915-1947.

Answered by:
Dr. Lee Schulz
Assistant Professor
Last updated on April 6, 2018