Cliff Asness: Missing the Best Days Isn’t the Real Problem

By Borsgade
- Published 12. June 2025

You are here: Home || All posts || InvestorNews || Cliff Asness: Missing the Best Days Isn’t the Real Problem

Clifford Asness of AQR Capital Management revisits his 1999 rejected paper that challenged one of the most common arguments against market timing. The widespread belief that missing just a few of the market’s best days destroys long-term returns is fundamentally flawed, according to Asness.

His analysis shows that while missing the best performing days does hurt returns, missing the worst performing days provides symmetrical benefits. The author demonstrates through both historical data and simulations that this “evidence” against market timing is mathematically obvious and essentially useless for investment decision-making.

Asness argues that legitimate criticisms of market timing should focus on investors’ lack of skill rather than cherry-picked scenarios of perfect incompetence. His 25+ years of out-of-sample data confirms these findings, showing the argument remains as flawed today as it was when first proposed.

Here are the key takeaways:

The common argument that missing the market’s best days ruins returns is symmetric – missing the worst days provides equal benefits, making it a meaningless exercise in perfect hindsight.

Realistic market timing strategies involve modest portfolio shifts (like moving from 80% to 60% stocks), not the extreme 100% in-or-out scenarios typically cited in anti-timing arguments.

The mathematical effects of missing extreme days are predictable from normal distribution theory and aren’t unique or surprising features of stock markets.

Market timing criticism should focus on investors’ lack of predictive skill and transaction costs rather than hypothetical scenarios of perfect bad timing.

Out-of-sample evidence from 1997-2024 confirms Clifford’s original findings, with the costs and benefits of market timing remaining symmetrical across different time periods.

I think the advice to avoid market timing is, for almost everyone, quite good. But the reason to avoid it is that you’re likely bad at it and doing it without skill is actually harmful, as you are randomly deviating from a properly diversified portfolio.

Click here to go to the external source.

Share the news

Disclaimer of liability

The above has been prepared by Børsgade ApS for information purposes and cannot be regarded as a solicitation or recommendation to buy or sell any security. Nor can the information etc. be regarded as recommendations or advice of a legal, accounting or tax nature. Børsgade cannot be held liable for losses caused by customers’/users’ actions – or lack thereof – based on the information in the above. We have made every effort to ensure that the information in the above is complete and accurate, but cannot guarantee this and accept no liability for errors or omissions.

Readers are advised that investing may involve a risk of loss that cannot be determined in advance, and that past performance and price development cannot be used as a reliable indicator of future performance and price development. For further information please contact info@borsgade.dk

You might also find this interesting:

Thomas Shrager: Superior Value Outside the U.S

July 3, 2025

In a comprehensive interview, Thomas Shrager and Jay Hill from the renowned New York value investing boutique Tweedy, Browne articulate their belief that the most compelling investment opportunities currently lie outside the United States. The veteran fund managers, who oversee portfolios for the 104-year-old firm, explain that international markets offer dramatically better value propositions than the overvalued U.S. equity market, which they describe as “priced for perfection” at 24 times earnings.

Aswath Damodaran: The Uncertain Payoff from Alternative Investments

June 18, 2025

Professor Aswath Damodaran’s latest analysis challenges the conventional wisdom surrounding alternative investments, revealing significant gaps between marketing promises and actual performance. Aswath examines how institutional and individual investors have increasingly embraced alternatives like hedge funds, private equity, and venture capital, often with disappointing results despite decades of compelling sales pitches.

Alternative investments have gained mainstream acceptance over the past two decades, moving beyond their traditional institutional confines to target individual investors. The core argument for these investments rests on two pillars: their supposedly low correlation with traditional stocks and bonds, and their potential to generate excess returns through superior management and market inefficiencies. However, Damodaran’s analysis suggests these benefits may be largely illusory when subjected to rigorous scrutiny.

Michael Mauboussin: How to Handle Intangibles in Modern Value Investing

June 18, 2025

Michael Mauboussin, Head of Consilient Research at Morgan Stanley, delivered a compelling keynote presentation at the Ben Graham Centre for Value Investing’s 2025 conference, addressing how the rise of intangible assets has fundamentally altered the landscape of value investing.

Drawing from nearly a century of investment wisdom while adapting to modern realities, Mauboussin argues that traditional accounting methods have become increasingly inadequate for evaluating companies in today’s intangible-heavy economy. His presentation reveals that intangible investments now represent 1.7 times tangible investments in the U.S. economy, a complete reversal from 1977 when tangible investments dominated by a factor of 1.4.