Performance Evaluation of Market Timers

21 Pages Posted: 11 Apr 2007  

Alex Kane

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS)

Stephen Gary Marks

Boston University - School of Law

Date Written: July 1988

Abstract

Previous investigators have shown that the Sharpe measure of the performance of a managed portfolio may be flawed when the portfolio manager has market timing ability. We develop the exact conditions under which the Sharpe measure will completely and correctly order market timers according to ability. The derived conditions are necessary, sufficient, and observable. We compare them to empirical estimates of actual market conditions, and find that the circumstances which can lead to a failure of the Sharpe measure do in fact occur. We show, however, that such failures can be greatly reduced by more frequent sampling.

Suggested Citation

Kane, Alex and Marks, Stephen Gary, Performance Evaluation of Market Timers (July 1988). NBER Working Paper No. w2640. Available at SSRN: https://ssrn.com/abstract=439569

Alex Kane (Contact Author)

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States

Stephen Gary Marks

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Paper statistics

Downloads
20
Abstract Views
371