Market Timing: Opportunities and Risks

19 Pages Posted: 10 Sep 2017

Date Written: November 2016


Asset allocation decisions, particularly those involving market timing, create both opportunities and pitfalls for investors. In the aftermath of the crash of October 1987, many investors sought protection of capital through market timing or tactical asset allocation strategies. Since then, the popularity of tactical asset allocation has increased both for professional investment managers and individual investors alike.

In this paper, I explore opportunities for enhancing returns using tactical asset allocation and market timing, as well as the challenges posed by market timing, including higher costs and the risk of missing the best-performing days of the market. I examine whether investors can succeed using tactical asset allocation and market timing strategies and look to behavioral finance concepts to explain why investors continue to embrace market timing in their investment process.

I find that strategic asset allocation was the most important driver of long-term investment success. This is because most market timers typically fail to accurately predict important equity market swings. The long-term odds are not in favor of market timing strategies.

Keywords: market, timing, value, investing, capital, allocation

Suggested Citation

Antoons, Wim, Market Timing: Opportunities and Risks (November 2016). Brandes Institute Research Paper No. 2016-06, Available at SSRN: or

Wim Antoons (Contact Author)

Brandes Institute

11988 El Camino Real, Suite 500
P.O. Box 919048
San Diego, CA 92191-9048
United States

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