You are welcome to the Department of Economics and Finance research seminar "Discounting Market Timing Strategies". The seminar will take place on 14 April, at 16:00 - 17:00 on MS Teams (link).
Presenter: Toomas Laarits (NYU Stern School of Business).
Abstract: The finance literature has documented numerous market timing strategies that allow investors to obtain seemingly superior Sharpe ratios and alphas relative to underlying buy-and-hold strategies. I document a novel fact regarding such strategies: practically every timing strategy documented in the literature exhibits a risk-return tradeoff that deteriorates as the holding period increases. While the aggregate market shows mean reversion over holding periods longer than five years, such timing strategies exhibit variance ratios that keep increasing as the holding period lengthens, rendering them less appealing to long horizon investors. I show that such seasonalities obtain in a model with predictable time-varying conditional volatility of underlying state variables. Overall, the results illustrate how such timing strategies can persist in equilibrium and underline the importance of capturing long-horizon risk exposures.
The public research seminars of the Department of Economics and Finance (DEF) at Tallinn University of Technology usually take place on the second and fourth Wednesdays of the month in both onsite and online format, unless announced otherwise. The presentation will last approximately 45 minutes followed by 15 minutes of discussion. The seminars are held in English. Copies of the paper are usually made available at the seminar. The DEF seminar series is organised in collaboration with the project ”Individual Behaviour and Economic Performance: Methodological Challenges and Institutional Context” (IBEP), which has received funding from the European Union’s Horizon 2020 Research and Innovation programme under Grant Agreement No 952574. Questions about the seminar can be sent to the IBEP seminar coordinator Rachatar Nilavongse, email@example.com.