When prices go down buy and hold. Why? Because of future returns...
Here are two concepts about "expected return" quoted from economists Fama and French at their website: www.dfaus.com :
Here are two concepts about "expected return" quoted from economists Fama and French at their website: www.dfaus.com :
"...in the short run the number of
shares outstanding is fixed. As a result, changes in risk cannot affect the
aggregate portfolio of all investors; you cannot reduce your equity position
unless someone else is willing to increase his. Changes in risk can, however,
affect price. When risk goes up I expect prices to fall and expected returns to
rise..."
AND
"...the onset of high volatility
should be associated with price declines that increase expected returns going
forward (to compensate investors for the higher volatility), and the onset of a
low volatility period should be associated with price increases that lower
expected returns going forward. As a result, if you bounce in and out of the
market in response to variation in volatility, you are likely to be in when
expected returns are low and out when expected returns are
high..."