Summary
- Timing greatly enhances returns in noisy market conditions, as the unpredictability of traders can create significant divergence from fundamental values.
- This article highlights three top trades in positive signals from different portfolio models.
- Leveraging key variables to detect sector and market changes protects downside risks and enhances returns even in long-term value portfolios, helping to avoid painful situations.
- The US Dollar Index decline from the January peak may create strong momentum for the current sample selections through ongoing volatility and frequent negative signals.
Introduction
The unpredictability of noise traders’ beliefs creates a risk in the price of the asset that deters rational arbitragers from aggressively betting against them. As a result, prices can diverge significantly from fundamental values even in the absence of fundamental risk.
~ DeLong J. B. et al. (1990).
