Are Monthly Market Returns Predictable?
39 Pages Posted: 11 Jul 2014 Last revised: 15 Jan 2020
Date Written: January 14, 2020
We document significant persistence in the market timing performance of active individual investors, suggesting some investors are skilled at timing. We also show that the net purchases of skilled versus unskilled active investors predict monthly market returns. Our tests use data on all trades by active Finnish individual investors over 14.5 years. Our evidence suggests that it is possible to use the trading patterns of skilled investors to anticipate market movements, lending credibility to the view that market returns are somewhat predictable.
Keywords: Market timing, return predictability, bubbles, market crashes
JEL Classification: G10, G11, G12, G14, G15
Suggested Citation: Suggested Citation