Sawyer Capital ManagementBeware Lure of Market Timing – Sawyer Capital Management https://www.sawcap.com Evolutionize Web Site Tue, 14 Nov 2017 19:30:19 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 Beware Lure of Market Timing https://www.sawcap.com/2014/04/14/beware-lure-of-market-timing/ https://www.sawcap.com/2014/04/14/beware-lure-of-market-timing/#respond Mon, 14 Apr 2014 15:01:01 +0000 http://evolvemypractice.com/?p=807 Market-timing strategies attempt to outperform a buy-and-hold strategy by anticipating the future direction of a market. They can work, but mostly they don’t. First, such strategies are based on the belief that future security prices are predictable, typically through the use of technical indicators, such as trend following or momentum, that are computed from the...

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]]> Market-timing strategies attempt to outperform a buy-and-hold strategy by anticipating the future direction of a market. They can work, but mostly they don’t.

First, such strategies are based on the belief that future security prices are predictable, typically through the use of technical indicators, such as trend following or momentum, that are computed from the past prices.

There are numerous papers that confirm the superior performance of momentum strategies across markets and around the globe. Studies have also found that trend-following strategies have enhanced risk-adjusted returns, producing higher Sharpe ratios.

Also, since some trend-following trading rules would have helped investors avoid some of the massive losses experienced during the two severe bear markets that occurred during the first decade of 2000s, the popularity of such strategies has increased.

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