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Risks associated with market timing under different market conditions

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  • Dumont de Chassart, Marc
  • Firer, Colin

Abstract

This study assesses the risk/return profile of three market timing strategies namely traditional, bull and bear timing under different market conditions on the Johannesburg Stock Exchange. The results indicate that market timing does lead to a lower variability of returns than a buy-and-hold strategy. On a risk-adjusted basis the required forecasting ability necessary to outperform the market is lower than previously thought. Under bearish conditions a random guess is expected to yield returns above the risk-adjusted market return regardless of the timing strategy employed.

Suggested Citation

  • Dumont de Chassart, Marc & Firer, Colin, 2004. "Risks associated with market timing under different market conditions," Omega, Elsevier, vol. 32(3), pages 201-211, June.
    • Handle: RePEc:eee:jomega:v:32:y:2004:i:3:p:201-211
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    References listed on IDEAS

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    1. Firer, C & Sandler, M & Ward, M, 1992. "Market timing: A worthwhile strategy?," Omega, Elsevier, vol. 20(3), pages 313-322, May.
    2. Waksman, G. & Sandler, M. & Ward, M. & Firer, C., 1997. "Market timing on the Johannesburg Stock Exchange using derivative instruments," Omega, Elsevier, vol. 25(1), pages 81-91, February.
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    Cited by:

    1. Howard Qi & Yan Alice Xie & Sheen Liu, 2010. "Credit Risk Models: An Analysis Of Default Correlation," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(1), pages 37-49.

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