Short-term orientation of equity market creates time arbitrage opportunity
We believe a time arbitrage opportunity is available to long-term investors who look beyond transitory concerns.
Ryan Diamant, Daniel Delany and Matthew Scherer
Jun. 03, 2025
17-minute read
- The average holding period of equity investments has shortened considerably from 9 years in the mid-1970s, to slightly more than 6 months in 2025.
- Daily trading volume in the U.S. has nearly tripled over the past decade, with algorithmic trading now dominating the market resulting in a persistent overreaction to events, headlines, and macro developments.
- The majority of sell-side commissions are paid for by hedge funds, leading to short-term skewed research.
- The vast majority of estimates published by the sell-side are provided in the first 4 forward quarters, resulting in trade calls that have been reduced from years to weeks or months.
- The “2 and 20” hedge fund compensation structure creates a market dominated by investors incentivized to meet annual goals.
- Longer-term focused companies outperform their short-term peers on several important financial measures.
- Earnings growth can be used as a tool to assess a long-term orientation of companies and is under penetrated in international markets.
Daniel Delany and Matthew Scherer are investment advisor representatives with CIBC Private Wealth Advisors Inc., a sub-adviser to the CIBC International Growth Strategy offered by CIBC Asset Management.
Ryan Diamant, CFA
Client Portfolio Manager, Equities, CIBC Asset Management
Daniel Delany, CFA
Co-Lead Portfolio Manager, CIBC Private Wealth Advisors Inc.
Matthew Scherer, CFA
Co-Lead Portfolio Manager, CIBC Private Wealth Advisors Inc.
