These educational endowed investment geeks (Jussi Keppo, Tyler Shumway and Daniel Weagley) say yes! The bigger question...are you one of them?
From this academic paper:
" We have learned a great deal about the behavior of individual investors over the past decade. We know they make lots of mistakes: trading too much, holding onto losers too long, buying stocks that appear in the news, trading with stale limit orders, and many other suboptimal behaviors. However, we also know they learn with experience, that some individual investors can consistently pick stocks that outperform the market even after adjusting for risk, and that smarter investors have better performance. A number of recent papers test whether individuals as a group have any ability to forecast prices, finding evidence both for and against smart individual investors. We test whether some individuals are able to consistently time the stock market, focusing on recent market crashes."Good luck and tell us if you are one of the chosen few:
scribd.com/doc/234930480/SSRN-id2463884
Comments
That's a rough estimate for sure. The losers are the ones who were not in the year 2000 tech bubble. These new investors will be slaughtered. Those if us who did go through it are already getting signs and are making plans.
I agree, we investors who have logged some time and have followed the markets through the years have an awareness of when good value can be had in the markets along with a feeling when valuations have become stretched. Currently, there are spots in the markets where I feel valuations are in bubble territory. One of them is the Russell 2000 Index where I believe the TTM P/E Ratio is in the 70’s. For me, this is just too richly priced and I have recently trimmed my allocation in small caps.
Old_Skeet
In his famous speech, Martin preceded his punch bowl comment by saying, on behalf of the Fed, “…precautionary action to prevent inflationary excesses is bound to have some onerous effects…” The flipside -- a lack of precautionary action by the Fed -- will have its own set of consequences in time. It is very difficult to say when exactly these will happen, but near-term indicators suggest the hangover won’t hit while you’re relaxing at the beach this summer.
Equity Markets: The Bigger they Come the Harder they Fall
The S&P500 has now gone nearly 800 days since a correction of more than 10 percent – the “meaningful” level for many analysts. The more extended the market becomes, the larger the eventual decline may be. Over the last 50 years, the longer the time between market corrections, the steeper the drop once the correction does occur.(chart)
http://guggenheimpartners.com/perspectives/macroview/the-hangover
One of my favorite personal stories happened during the soaring US growth equity market from 1995 to 2000. In particular, those new internet companies had market values that far exceeded stodgy old brick and mortar companies that had actual revenue and net income.
It was around 1998, Marty Whitman, who managed TAVFX, encouraged shareholders to email him with investment questions. He would publish some of the more interesting questions with his response on the mutual fund's website. I think that was quite unique.
So I sent an email posing a question about the internet stock lunacy I was observing. I asked him what he thought about shorting one of these internet companies. If I remember correctly, it was Amazon. I may have compared the market value to that of Boeing.
Marty actual sent directly to me an email response which surprised the heck out of me. He explained that while the market valuation of Amazon had little to do with its intrinsic value, I would be foolish to short the stock. He explained that this phenomenon could continue for sometime, and my idea had great risk. I did listen to Marty, and let that "opportunity" pass. I got a great life lesson at a very low cost.
Great story. Thanks.
http://www.maynardkeynes.org/keynes-the-speculator.html