Hedge fund participation in the share market downturn has only intensified the markets' rapid fall, according to Australian Unity chief investment officer David Bryant.
"They make a lot of money very quickly on the downside and unfortunately the Australian market, in relative size terms is an easy target for some of these," he said.
On January 21 the All Ordinaries Index dropped the most since the October 1989 stock market mini-crash on worries that a potential US recession could cause a slowdown in global demand for commodities. However the markets rebounded at the end of the week.
The index fell to its lowest level in over a year, while the benchmark S&P/ASX 200 Index declined the most since data began in 1992.
According to Bryant, the case for a bear market is still unclear.
"I find it funny that the Australian market has lost around four or five per cent more than the US market, but it is the US market where there is a substantial fear of recession, not here," he said.
"I don't think you can have bear markets just on sentiment, they are driven by fundamental weakness ... currently we don't have any of that and I must confess that to an extent, it is mystifying me a little bit."
According to data from Goldman Sachs JBWere (GSJBW), over the last 15 years Australian market corrections have averaged an 8 per cent retracement and lasted 11 weeks from top to bottom. They then take around 11 weeks to recover back to previous peaks.
GSJBW found that bear markets average a pull back closer to 20 per cent over 33 weeks and then take on average 52 weeks to regain previous peaks.
