Timing the stock market

M

Markjbloggs

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Conventional wisdom is that it cannot be done, but can anyone point me to studies / analyses that prove this?

thanks
M
 
DrMoriarty said:
It's a corollary of the Efficient Market Hypothesis. But do a Google search for "Timing the stock market" and you'll see loads of books and websites that claim to teach you the secrets...
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.....I'll take a wild guess here but I guess that most of those people have made their money from selling their books about timing the market ...as opposed to they making their money as due to timing the market
 
DrMoriarty said:
It's a corollary of the Efficient Market Hypothesis. But do a Google search for "Timing the stock market" and you'll see loads of books and websites that claim to teach you the secrets...
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Google is full of sh**e - I was hoping for something more specific from the collective wisdom here. I am particularly looking for empirical studies, nothing too theoretical.

Thanks for your Wikipedia reference.
M
 
DrMoriarty said:
Google just .

I meant to add a ':rolleyes:' at the end of my last sentence, but I must have clicked 'Submit' too quickly...
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True, Google is only as good as the internet, but it's paid search business model tends to return more of what Ninsaga referred to above.

Below is a quote from one of the links on Efficient Markets and Market Timing - any thoughts, folks?


Some investors, especially academics, believe it is impossible to time the market. Other investors, notably active traders, believe strongly in market timing. Thus, whether market timing is possible is really a matter of opinion.

What we can say with certainty is that it's very difficult to be successful at market timing continuously over the long-run. For the average investor who doesn't have the time (or desire) to watch the market on a daily basis, there are good reasons to avoid market timing and focus on investing for the long-run.
 
This is an excellent book to read - - gives you an excellent feel for how flawed some timing of the markets is.
 
Markjbloggs said:
Some investors, especially academics, believe it is impossible to time the market. Other investors, notably active traders, believe strongly in market timing. Thus, whether market timing is possible is really a matter of opinion.

What we can say with certainty is that it's very difficult to be successful at market timing continuously over the long-run. For the average investor who doesn't have the time (or desire) to watch the market on a daily basis, there are good reasons to avoid market timing and focus on investing for the long-run.
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Active traders would have you believe that timing the market is a good startegy because this is what they attempt to do. There were some statistics in the latest issue of The Economist that I may post to support the theory that more often that not it's "a mug's game" ((c) ClubMan)
 
did finance in college and remember reading that empirical studies found it near impossible to time markets accurately in the long term and in short term transaction costs nearly wiped out returns.they found the best way of investing was'nt to put a lump sum into market but to invest every month or every year and this smoothes out chances of buying at excessive prices.
 
This is certainly conventional wisdom less questioned than The Real Presence or Evolution. The implication is that asset allocation is dead, just put all your longterm savings/speculative capital in an index fund. This idea really got widespread acceptance in the US in the mid to late 90s. The US SP500 hasn't done much since although US smallcaps have.
This leads me to think that as long as this is conventional wisdom, returns on index investing will be disappointing.
Regards
 
tyoung said:
This leads me to think that as long as this is conventional wisdom, returns on index investing will be disappointing.
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And by definition, all indices will underperform?
 
Given that index funds charge a small(?) annual mgt fee to cover the cost of the fund (including the provider's profits or rather the provider's shareholders' returns) then they will underperform the overall market indices but by less than the average actively managed fund.

Does this mean the returns will be disappointing ? I suppose that depends on what you are/were expecting. ;)
 
Hope the disappointment continues just like the last 30 years!
Over the long haul the market or slightly below is fine for me.
 
bearishbull said:
did finance in college and remember reading that empirical studies found it near impossible to time markets accurately in the long term and in short term transaction costs nearly wiped out returns.they found the best way of investing was'nt to put a lump sum into market but to invest every month or every year and this smoothes out chances of buying at excessive prices.
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bearishbull...If you did finance in college you should have also learned about the markets tendency to overshoot on downward price movements...Hence straight away a chance for one to "time the market".

Anyway, if it is impossible to time the market then why bother even trying to value a company, P/E ratio etc...There would be no point as the company is fairly valued in the first place.
 
killeoin said:
bearishbull...If you did finance in college you should have also learned about the markets tendency to overshoot on downward price movements...Hence straight away a chance for one to "time the market".
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yes but they can also overshoot downwards!(dornbusch)
 
bearishbull said:
sorry misread your post.

yeah but you cant know the exact time of such overshoots untill after they happen.
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yeah but you could have a fairly good idea....

i.e.....9/11
Foot and Mouth
AIB after the Rusnak
 
killeoin said:
yeah but you could have a fairly good idea....

i.e.....9/11
Foot and Mouth
AIB after the Rusnak
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you could be in a dip rather than a large overshoot,having a fair idea isnt the same as timing the market in the short term. theres a massive body of evidence that you cant time the market in the short term.capital asset prices change for many many reasons as new information enters the market most of which is unpredicatable and difficult to anticipate like investor sentiment for the market as a whole.
 
Sorry about the delay in replying...

just in relation to that, thats assuming that investors are all rational....


And I would personally feel that they were overshoots...another example would be Elan would it not?
 
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