Buy The Dip? Not So Fast

A new paper spans 155 years of U.S. market data to ask a deceptively simple question — and arrives at an uncomfortable answer.

‘Buy the dip.’ It’s perhaps the most repeated piece of advice in retail investing — a mantra that feels like common sense. Prices fall, you buy more of something you already liked at a discount, and when prices recover you profit. What could be simpler? What could go wrong?

Quite a lot, it turns out. In a May 2026 study, Javier Estrada of IESE Business School puts the buy-the-dip strategy through rigorous empirical tests — drawing on over 155 years of U.S. stock market data. His conclusion: the conventional wisdom may be more comforting than correct.

What Was Examined

Estrada’s study covers U.S. stock and bond market data from February 1871 through December 2025, sourced from the well-known Robert Shiller dataset. That’s not months of data, or even decades — it’s a century and a half, encompassing the Great Depression, two World Wars, the dot-com crash, the 2008 financial crisis, and everything in between.

The research focuses on monthly dips of varying severity — any negative monthly return (D0), down to brutal months with losses exceeding 15% (D15). In total, there were 766 months with negative returns in the sample, and just 5 months with drops exceeding 15%.

The Numbers Behind the Study

• 1,859 monthly observations

You can read the rest of my latest Financial Advisor column here