Advertisement

Empirical Part II – Investment Strategies

  • Patrick Scheurle

Abstract

Cochrane (1999b) points out the possible application of market timing strategies as a main implication of return predictability. Hence, the rejection of the random walk model might reveal exploitable investment strategies. Moreover, investment strategies can shed light on the economic significance of forecasting power. The findings above support the evidence on return predictability; however, nothing was said about the economic magnitude and its meaning for portfolio management. How a market timing strategy based on the previous analyses might look may be of interest to practitioners. Hence, I identify two reasons for a test of the above-stated hypothesis. First, there is the economic significance which is of interest. The second reason is the possible uncertainty about statistical tests of forecasting models. For instance, Leitch and Tanner (1991) or Gerlow, Irwin and Liu (1993) show a possible economic success of forecasting models even if statistical measures do not support their predictive power.

Keywords

Investment Strategy Excess Return Sharpe Ratio Investment Period Calibration Window 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Copyright information

© Gabler | GWV Fachverlage GmbH 2010

Authors and Affiliations

  • Patrick Scheurle

There are no affiliations available

Personalised recommendations