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Article

Measuring Market Timing: An International
Examination of Market Timing Conditions

William F. Johnson and Scott W. Barnhart
The Journal of Trading Spring 2014, 9 (2) 6-20; DOI: https://doi.org/10.3905/jot.2014.9.2.006
William F. Johnson
is a visiting assistant professor of finance at the Mays Business School at Texas A&M University in College Station, TX.
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  • For correspondence: wjohnson@mays.tamu.edu
Scott W. Barnhart
is an associate professor of finance at Florida Atlantic University in Boca Raton, FL.
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  • For correspondence: sbarnhar@fau.edu
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Abstract

The objective of this article is to introduce an expost measure of market timing independent of luck or skill in order to identify when market conditions are more favorable to successful market timing and to evaluate the conclusions of several previous academic studies. We propose that basic market conditions rotate from favoring buy-and-hold investing to favoring market timing strategies, and that these conditions can be measured in any equity market by tracking the results of a constant skilled market timer. We seek to identify what market return conditions are more conducive to successful timing for this constant-skilled investor and when these conditions have been present over our sample period.

The MTBH metric was calculated for 44 countries for 14 years and compares findings of eight previous studies of the timing ability in mutual fund managers, stock traders, option traders, and individual investors across several U.S. and international indexes. The MTBH metric is particularly accurate in explaining the positive timing results for options traders and hedge fund managers, but not as accurate in explaining mutual fund timing. The MTBH metric provides an alternative explanation for non-persistent market-timing results outside of the investors’ behavior or skill and can be applied to any foreign or domestic market to evaluate managers’ timing results.

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The Journal of Trading: 9 (2)
The Journal of Trading
Vol. 9, Issue 2
Spring 2014
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Measuring Market Timing: An International
Examination of Market Timing Conditions
William F. Johnson, Scott W. Barnhart
The Journal of Trading Mar 2014, 9 (2) 6-20; DOI: 10.3905/jot.2014.9.2.006

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Measuring Market Timing: An International
Examination of Market Timing Conditions
William F. Johnson, Scott W. Barnhart
The Journal of Trading Mar 2014, 9 (2) 6-20; DOI: 10.3905/jot.2014.9.2.006
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  • Article
    • Abstract
    • TRADITIONAL TIMING MODELS, MARKET TIMING, AND BLACKJACK
    • DATA
    • THE MTBH MEASURE
    • MTBH AND PAST RESULTS
    • CONCLUSIONS
    • ENDNOTE
    • REFERENCES
  • Info & Metrics
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  • PDF (Subscribers Only)

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