Black swans, market timing and the Dow

Javier Estrada

Applied Economics Letters, 2009, vol. 16, issue 11, 1117-1121

Abstract: Do investors in the US stock market obtain their long-term returns smoothly and steadily over time or is their long-term performance largely determined by the return of just a few outliers? How likely are investors to successfully predict the best days to be in and out of the market? The evidence from the Dow Jones Industrial Average over the 1900-2006 period shows that a few outliers have a massive impact on long-term performance. Missing the best 10 days resulted in portfolios 65% less valuable than a passive investment and avoiding the worst 10 days resulted in portfolios 206% more valuable than a passive investment. Given that 10 days represent 0.03% of the days in the sample, the odds against successful market timing are staggering.

Date: 2009
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:16:y:2009:i:11:p:1117-1121

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/17446540802360074

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().