BUSI 4502 Lecture Notes - Lecture 8: Switching Barriers, Transaction Cost, Reward System
30 Aug 2018
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Document Summary
Market timers attempt to maximize return by forecasting market turns and make decisions about whether to be in or out of particular asset class. A market timer might make monthly, quarterly or annual decision to determine in investing in stocks or t-bill. Recently, the switches were drastic and many investors tilted away from stocks. Sharpe (1975) article alerted investors regarding potential pitfall and suggest annual switches between stock and cash equivalent to be made instead. From there, more previous research modified the study and has attempted to explain market timing in various ways like looking at actual performance of managers. Hence, the main aim is to determine how good is buy and hold strategy as compared to all positive alternative investment paths. The author used different approaches to examine the market timing as compared to past study. Roulette wheel (rw) is used and it is a normalized ranked return.
