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Buy-And-Hold Versus Momentum Investment Strategies During Financial Crises, Howard Ly

Finance Undergraduate Honors Theses

In his article, “Where the Black Swans Hide & The 10 Best Days Myth,” Mebane Faber found that most of the best and worst trading days occur when the market is already declining. This phenomenon is due to increased volatility during bear markets, a result of investors’ emotions. Emotions, particularly fear and greed, lead to irrational trading behavior, resulting in rampant speculation or panic selling. Ideally, an investor would be in the market for the above-mentioned best days and be out of the market during the worst days. However, the difficulty in predicting these important dates have led some investors …