• HFRC Forschung

Detailübersicht

Publication Timing the stock market: Does it really make no sense

Type

Working Paper

Institution(s)

University of Hamburg, Concordia University

Year

2014

Author(s)

Hubert Dichtl 
Wolfgang Drobetz 
Lawrence Kryzanowski

Research Area

Capital Markets

Keywords

Market timing, expected utility theory, cumulative prospect theory, bootstrap simulation

Abstract

Many private and institutional investors attempt to time the market and generate abnormal returns by periodically switching their portfolio allocations between the stock market and the cash market based on their return predictions. However, most academic studies emphasize that a successful market timing strategy requires a prediction accuracy that is usually not observable in reality. While existing studies evaluate the outcomes based on traditional return and risk measures, we develop a “simulated market timer” that does not require a specific forecast model and adopt a decision theoretic framework to compare market timing with a buy-and-hold strategy. Our bootstrap-based simula-tions show that market timing can even add value for some investors with only moderate prediction skills.

Presentations

-

Download

Article available here