Paper
The Timing Factor in Business and Stock Market Forecasting
Published Mar 1, 1963 · Anthony Gaubis
Financial Analysts Journal
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Abstract
THE QUESTION OF "TIMING" of business and stock market cycles has intrigued statisticians and economists ever since efforts were first made to understand the past in order to help anticipate the future. I was first introduced to this subject while taking a college course in business statistics some forty years ago. The more popular concepts of the duration of economic cycles at that time ranged from the seven year periodicity mentioned in the Bible, to forty month cycles popularized primarily by students of the stock market. Theoretical waves reaching their crests at nine or twenty year intervals were also suggested quite frequently in discourses on this subject. A difficulty in reaching a conclusion as to which approach or concept is the more dependable or helpful lies in the fact that no two students define the cycle in exactly the same terms. This is still true as may be seen from the fact that some individuals tell us that the advance in the stock market from 1921 to 1929 consisted of three distinct cycles-with the upward phases running from 1921 to 1923, 1923 to 1926, and then from 1926 to 1929; while others merely recognize the 1923 decline as a "bear market," with the very sharp but brief setback in 1926 being termed a "readjustment" in a cyclical advance which they date from October 1923 to August 1929. Similarly, in a more recent period, we have seen a difference in classifications of the setbacks in 1946 and in 1953, as between "market corrections" or "cyclical" declines. The subject is also confused by the tendency of many "decimal-point" statisticians, as opposed to practical analysts, as to whether a particular move should be dated from the timing of an extreme high or low, or whether allowance should be made for any "overshoots" in statistical series because some unusual development (such as a major strike or political pronouncements) temporarily changed the tempo of trading and therefore the duration of any period of accumulation or distribution. Students of the cycle also have difficulty in agreeing with each other when one individual refers to the Dow-Jones Industrial Stock Average as a measure of the market as a whole; while someone else bases his studies on the New York Times Index, the Standard & Poor's compilations, or various other indexes of the ebb and flow of stock prices. On a number of occasions, the turning points in these averages have been several months apart. In my own studies, I have preferred to emphasize the practical rather than the theoretical or pinpoint type of analyses. I have also found that if we separate the problem or question of extent of any move from that of duration, we can develop more helpful "rules" to be incorporated in any composite "formula" for appraising the future, than if we confuse these two entirely different problems. This is particularly true if, as some of us suspect, man-made decisions can have a greater influence on the levels of stock prices than on the Timing of cyclical readjustments.
The timing of business and stock market cycles is complex and influenced by various factors, making it difficult to predict the future with certainty.
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