Evaluating a stock market timing strategy: the case of RTE Asset Management

Abstract

Market timing is a popular active investment strategy that promises to beat the market. However, the evidence on the ability of timers to outperform the market is mixed. This paper provides strong supporting evidence of the timing ability of RTE Asset Management by investigating the implemented buy and sell recommendations derived from its proprietary computerized model over the 1979–1999 period and several subperiods. We use various performance-evaluation methodologies that investors can easily implement. The evidence obtained on market timing skills is essentially invariant to the evaluation method used if the analysis is performed over a long time period.