Are Monthly Market Returns Predictable?

42 Pages Posted: 11 Jul 2014 Last revised: 8 Jan 2021

See all articles by Jussi Keppo

Jussi Keppo

National University of Singapore - NUS Business School

Tyler Shumway

University of Michigan at Ann Arbor, The Stephen M. Ross School of Business

Daniel Weagley

Georgia Institute of Technology - Scheller College of Business

Date Written: December 15, 2020

Abstract

We document significant persistence in the market timing performance of active individual investors, suggesting that some investors are skilled at timing. Using data on all trades by active Finnish individual investors over almost 15 years, we also show that the net purchases of skilled versus unskilled investors predict monthly market returns. Our results lend credibility to the view that market returns are predictable, without having to specify which variables active investors use to successfully time the market.

Keywords: Market timing, return predictability, bubbles, market crashes

JEL Classification: G10, G11, G12, G14, G15

Suggested Citation

Keppo, Jussi and Shumway, Tyler and Weagley, Daniel, Are Monthly Market Returns Predictable? (December 15, 2020). Review of Asset Pricing Studies, Accepted, Georgia Tech Scheller College of Business Research Paper No. 2015-12, Available at SSRN: https://ssrn.com/abstract=2463884 or http://dx.doi.org/10.2139/ssrn.2463884

Jussi Keppo

National University of Singapore - NUS Business School ( email )

1 Business Link
Singapore, 117592
Singapore

Tyler Shumway

University of Michigan at Ann Arbor, The Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-4129 (Phone)
734-936-0274 (Fax)

HOME PAGE: http://www.umich.edu/~shumway

Daniel Weagley (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
(404) 385-3015 (Phone)

HOME PAGE: http://www.danielweagley.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
786
Abstract Views
5,038
rank
38,272
PlumX Metrics