Are Monthly Market Returns Predictable?
Review of Asset Pricing Studies, Accepted
42 Pages Posted: 11 Jul 2014 Last revised: 8 Jan 2021
Date Written: December 15, 2020
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: Suggested Citation