Market timing

Ravi Jagannathan, Robert A. Korajczyk*

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingChapter

2 Scopus citations

Abstract

The work of Treynor and Mazuy (Harvard Business Review 44:131-136, 1966) spawned an extensive literature on returns-based measurement of portfolio performance which distinguishes between a manager’s ability to act on information specific to an individual asset (asset selection) and ability to forecast systematic risk premiums and adjust portfolio exposures accordingly (market, or factor, timing). In a world in which both dynamic trading strategies and derivative securities provide payoffs which are nonlinear in factor returns, obtaining a clear separation between asset selection and market timing is difficult. Additionally, predictability of risk premiums causes a confounding of timing based on public information versus true skill. However, disaggregating the measurement of the components allows us to obtain more accurate measures of the quantity of interest, total portfolio performance.

Original languageEnglish (US)
Title of host publicationPortfolio Construction, Measurement, and Efficiency
Subtitle of host publicationEssays in Honor of Jack Treynor
PublisherSpringer International Publishing
Pages49-71
Number of pages23
ISBN (Electronic)9783319339764
ISBN (Print)9783319339740
DOIs
StatePublished - Jan 1 2016

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)
  • Mathematics(all)

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