When (If Ever) Has it Paid to Wait for a Stock Market Correction?

Investors are periodically challenged with this question: with funds ready to invest, but faced with a market that is generally perceived to be expensive, is it better to wait for a market correction before investing? Many investors are certain that a correction must be around the corner, and thus little downside exists to holding excess cash. We explore the question of whether the historical record supports their near-certainty by examining the past 115 years of US stock market history. We conclude that while there may be valid reasons to hold excess cash based on specific forward-looking return estimates, the historical record does not suggest that, conditioned on a variety of entry criteria, waiting for a correction has positive expected return