The Odds of Profitable Market Timing

This statistical study refines and updates Sharpe’s empirical paper (1975, Financial Analysts Journal) on switching between US common stocks cash equivalents. According to the original conclusion, profitable market timing relies a representative portfolio manager who can correctly forecast next year at least 7 times out of 10. Four changes are made setting. The new data set begins ends with similar price-earnings ratios; more accurate approximation commissions is given; rationality assumptions examined; prospective basic Monte Carlo analysis carried so as consider heterogeneous performance number managers same forecasting accuracy. Although first three improve retrospectively odds timing, conclusion corroborated once more.