Market Timing: A Myth or a Possibility? Individual Investor and Mutual Fund Performance in the Stock Market
Abstract/Contents
- Abstract
- Investors are always looking for ways to increase their portfolio returns, ideally without taking on additional risk. Some investors pay others to manage their money, while other investors turn to market timing strategies, believing they can pick individual stocks or funds that will do better than a market benchmark. However, the current literature is divided on whether these market timing strategies are effective in reality. This paper analyzes a new market timing strategy for individual investors that uses changes to the Federal Funds rate target to indicate market entry and exit. The results of this analysis show that individuals cannot use these simple signals in order to consistently achieve higher portfolio returns than market benchmarks. This paper also analyzes allocation and return data for a new set of actively managed mutual funds. The results from these correlative analyses suggest that mutual funds also do not have positive market timing ability even though they have more capital and resources. Overall, this paper supports research claiming that investors, whether as individuals or as part of a fund, do not have the ability to consistently time the market and achieve significant and positive returns above market benchmarks.
Description
| Type of resource | text |
|---|---|
| Date created | May 3, 2019 |
Creators/Contributors
| Author | Selden, Genevieve |
|---|
Subjects
| Subject | Economics |
|---|---|
| Subject | finance |
| Subject | investing |
| Subject | stock market |
| Subject | Federal Reserve |
| Subject | mutual fund |
| Genre | Thesis |
Bibliographic information
| Related item | |
|---|---|
| Location | https://purl.stanford.edu/wy604tw7643 |
Access conditions
- Use and reproduction
- User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
Preferred citation
- Preferred Citation
- Selden, Genevieve. (2019). Market Timing: A Myth or a Possibility? Individual Investor and Mutual Fund Performance in the Stock Market. Stanford Digital Repository. Available at: https://purl.stanford.edu/wy604tw7643
Collection
Stanford University, Department of Economics, Honors Theses
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- Contact
- gselden@stanford.edu
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