Market Timing with Cay

28 Pages Posted: 14 Jun 2005

See all articles by Sandro C. Andrade

Sandro C. Andrade

University of Miami - Department of Finance

Ilona Babenko

Arizona State University

Yuri Tserlukevich

Arizona State University (ASU)

Abstract

We test whether market-timing strategies using deviations from the long-run log consumption-wealth ratio (cay) deliver superior investment perfomance. Using several statistical tests, we conclude that true cay contains economically significant information about future market returns. However, constraints such as the need of using estimated rather than true cay and the delays in availability of macroeconomic data cast doubt over the possibility of timing the market via mechanistic strategies based on cay. Further research is needed to ascertain whether successful timing strategies based on cay can be implemented.

Keywords: Market Timing, Investments, CAY

Suggested Citation

Andrade, Sandro C. and Babenko, Ilona and Tserlukevich, Yuri, Market Timing with Cay. Journal of Portfolio Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=741984

Sandro C. Andrade (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

HOME PAGE: http://moya.bus.miami.edu/~sandrade/

Ilona Babenko

Arizona State University ( email )

Department of Finance
W.P. Carey School of Business
Tempe, AZ 85287
United States

Yuri Tserlukevich

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

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