Timing is Everything: A Comparison and Evaluation of Market Timing Strategies

14 Pages Posted: 3 Nov 2005

See all articles by Chris Brooks

Chris Brooks

University of Bristol - School of Economics, Finance and Management

Apostolos Katsaris

CdR Capital Ltd

Gita Persand

University of Bristol - Department of Economics

Date Written: October 2005

Abstract

Following early failures, more recent empirical evidence has suggested that timing entries to and exits from equity markets may be feasible. A number of approaches to this most basic form of dynamic asset allocation are available, but which works best? This study investigates the relative profitability of several different methodologies using a very long dataset on the S&P 500. In order to overcome the accusations of data snooping and arbitrary parameter choice that beset much previous work in this area, we carefully consider whether the rule performance is sensitive to the specified user-adjustable parameters. We find that all but one of the approaches are able to beat a buy-and-hold equities strategy in risk-adjusted terms, although a strategy based on the difference between the earnings-price ratio and short term Treasury yields works best.

Keywords: market timing rules, speculative bubbles, dynamic asset allocation, S&P500, stock index returns

Suggested Citation

Brooks, Chris and Katsaris, Apostolos and Persand, Gita, Timing is Everything: A Comparison and Evaluation of Market Timing Strategies (October 2005). Available at SSRN: https://ssrn.com/abstract=834485 or http://dx.doi.org/10.2139/ssrn.834485

Chris Brooks (Contact Author)

University of Bristol - School of Economics, Finance and Management ( email )

School of Accounting and Finance
15-19 Tyndalls Park Road
Bristol, BS8 1PQ
United Kingdom

Apostolos Katsaris

CdR Capital Ltd ( email )

11 Charles II Street
London, SW1Y 4QU
United Kingdom
2038619900 (Phone)
SW1Y 4QU (Fax)

Gita Persand

University of Bristol - Department of Economics ( email )

8 Woodland Road
Bristol BS8 ITN
United Kingdom