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Alternative Market Briefing

Quant develops effective market timing strategy

Wednesday, July 05, 2017

amb
Baris Kaya
Benedicte Gravrand, Opalesque Geneva for New Managers:

A quant trader based in Bodrum, Turkey, has been developing a market timing strategy for the last six years and has found a way to make it an effective one. As most fund managers have given up on market timing, his strategy has become an interesting edge.

Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis.

Market timing is not as easy as it sounds. Dalbar, a financial market research firm, last year examined returns investors received relative to the market. They found over the past 20 years, investors in equity funds had lagged the S&P 500 benchmark by an average of 4.66% per year, partly due to poor timing decisions. Market timing can be unsuccessful because of the market's unpredictability and lack of efficiency, and investor irrationality. Furthermore, the cost of frequent trading can be high, and parking money in cash in times of uncertainty can engender further opportunity costs. All in all, the odds appear in favor of the buy-and-hold investor rather than the market timer, Forbes ......................

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