Abstract

http://ssrn.com/abstract=1887264
 
 

References (35)



 
 

Footnotes (13)



 


 



On the Expected Performance of Market Timing Strategies


Winfried G. Hallerbach


Robeco Asset Management, Quantitative Strategies

July 15, 2011

The Journal of Portfolio Management Summer 2014, Vol. 40, No. 4: pp. 42-51

Abstract:     
We derive expressions for the Information Ratio (IR) that can be expected from directional market timing strategies. Our results hold as accurate approximations and lift Grinold’s [1989] “Fundamental Law of Active Management” to an operational level. In addition, we separate “time series breadth” (the timing frequency per strategy) from “cross-section breadth” (the number of separate markets) because they contribute differently to performance. We show that implementing volatility-weighted bet sizes, both in the time series context of a single underlying market and in the cross-section context of multiple markets, increases the expected timing IR. Our theoretical results can be used as a benchmark for and reality check on the back-tested performance of timing strategies. We confirm the accuracy of our results by simulating timing strategies for equities and fixed income.

Keywords: risk-adjusted performance, information ratio, market timing, volatility-weighting

JEL Classification: C13, C14, C52, G11

Accepted Paper Series





Not Available For Download

Date posted: July 16, 2011 ; Last revised: August 23, 2014

Suggested Citation

Hallerbach, Winfried G., On the Expected Performance of Market Timing Strategies (July 15, 2011). The Journal of Portfolio Management Summer 2014, Vol. 40, No. 4: pp. 42-51. Available at SSRN: http://ssrn.com/abstract=1887264 or http://dx.doi.org/10.2139/ssrn.1887264

Contact Information

Winfried George Hallerbach (Contact Author)
Robeco Asset Management, Quantitative Strategies ( email )
Coolsingel 120
Rotterdam, 3011 AG
Netherlands
+31102242316 (Phone)
HOME PAGE: http://www.robeco.com/quant
Feedback to SSRN


Paper statistics
Abstract Views: 3,640

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.266 seconds