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The recipient’s continued acceptance of information and materials from DIL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language. Information and opinions presented in this material have been obtained or derived from sources believed by DIL to be reliable, and DIL has reasonable grounds to believe that all factual information herein is true as at the date of this document.ĭIL issues information and materials in English and may also issue information and materials in certain other languages. DIL is regulated by the Central Bank of Ireland (Registration No. Issued by Dimensional Ireland Limited (DIL), with registered office 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED
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NOTICE TO INVESTORS IN SWITZERLAND: This is an advertising document. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision. (DFAL), as applicable (each an “Issuing Entity,” as the context requires), give financial advice. Neither Dimensional Ireland Limited (DIL) nor Dimensional Fund Advisors Ltd. WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED OR DIMENSIONAL FUND ADVISORS LTD. Dividends: Reinvested in the paying company until the portfolio is rebalanced. Sources: CRSP for value-weighted US market return. Exclusions: American Depositary Receipts. Market Downturn Threshold: Magnitude of the US stock market’s decline used to determine when to switch from US stocks to US Treasury bills.ĭays Out of Market: Number of days during which the hypothetical strategy is invested in US Treasury bills instead of US stocks.įama/French Total US Market Research Index: The value-weighed US market index is constructed every month, using all issues listed on the NYSE, AMEX, or Nasdaq with available outstanding shares and valid prices for that month and the month before. Standard deviations are often used to quantify the historical return volatility of a security or portfolio. Standard Deviation: A measure of the variation of a set of data points. Volatility is often measured using standard deviation.Ĭross-Sectional Return Dispersion: A statistical measure of the variability of individual stocks’ returns. Return Volatility: A statistical measure of the variability of returns for a given security or portfolio. Compared to the market’s long-term annualized return of 9.57%, nearly all of the timing strategies underperform the simple buy-and-hold strategy. Exhibit 2 illustrates this point using hypothetical timing strategies that switch from US stocks into US Treasury bills after market downturns of various magnitude and switch back to US stocks following different lengths of time out of the market. However, the data suggest this type of market timing may instead reduce investors’ gains over time. The intuition may be that sitting out of the market for a period of time can help avoid further losses. In each case, active managers underperformed their index benchmarks.Īnother way some investors might react to a market that has fallen is to jump ship and sell out of stocks. We considered two different ways of measuring stock market stress: market volatility (or how much stocks rise or fall in a given month) and return dispersion (or the range of returns across all US stocks). To explore this issue, we looked at the performance of active US mutual fund managers over the past two decades.