The ability of investors to time the market is a perpetual topic of debate. The sentiment here in the sub tends to summarized by "nobody can time the market" and of course that old favorite "it's time in the market, not timing the market" that counts.
Yet this conclusion seems very strange indeed given that the academic consensus has completely shifted from the random walk view of the 1970s (popularized by Burt Malkiel's book) to the view that stock returns are time-varying and predictable (summarized in John Cochrane's presidential address to the American Finance Association a few years ago). [Side note: just because returns are predictable need not imply markets are inefficient, but that's a discussion for another post.]
Where then is the evidence that people can predict market returns? Recent research by Michael Brandt (John's former student, a professor at Duke, and successful hedge fund manager) and co-authors find that equity hedge funds that vary their market exposure the most in response to macro information do outperform to the tune of 5.5% of alpha per year.
Submitted June 19, 2017 at 08:49PM by cb_hanson_III http://ift.tt/2su9APv
