Timing is everything: an evaluation and comparison of market timing strategies

Brooks, Chris, Katsaris, Apostolos and Persand, Gita (1970) Timing is everything: an evaluation and comparison of market timing strategies Social Science Research Network

Record type: Monograph (Working Paper)

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

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Published date: 1 January 1970

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

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