Revisiting the Fisher and Statman Study on Market Timing

Wade Pfau

MPRA Paper from University Library of Munich, Germany

Abstract: Valuation-based market timing demonstrates greater potential to improve risk-adjusted returns for conservative long-term investors than given credit by Fisher and Statman (2006). On a risk-adjusted basis, market-timing strategies provide comparable returns as a 100 percent stocks buy-and-hold strategy but with substantially less risk. Meanwhile, market timing provides comparable risks and the same average asset allocation as a 50/50 fixed allocation strategy, but with much higher returns. Also, defining market timing as either 100 percent stocks or 100 percent Treasury bills does not provide a hedge against the possibility that valuations may depart from their historical averages for extended periods.

Keywords: market valuations; cyclically-adjusted price-earnings ratio; PE10; stock returns; market timing; long term; tactical asset allocation; buy and hold (search for similar items in EconPapers)
JEL-codes: C15 D14 G11 G14 N21 N22 (search for similar items in EconPapers)
Date: 2011-03-09
New Economics Papers: this item is included in nep-rmg
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https://mpra.ub.uni-muenchen.de/29448/1/MPRA_paper_29448.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/35006/2/MPRA_paper_35006.pdf revised version (application/pdf)

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