Maximize Market Timing Returns: Implementing Volatility-Weighted Bets
Alpha Beta IR Analytics, Active Portfolio Management Series, 2018
10 Pages Posted: 13 Mar 2019
Date Written: September 24, 2018
Market timing is preferred path to alpha because it is very simple to implement even by individual investors. In this paper we apply the Hallerbach (2014) methodology to emerging markets from Asia and Eastern Europe. We find that by using volatility-weighted bets we improve significantly the ex-post Information ratio of the strategy. This approach is even more important in emerging markets, where volatility is much higher than on traditional stock exchanges.In our research we select 15 leading emerging markets around the world. Examining volatility-weighted bets on emerging markets is even more interesting, because of the significantly higher volatility in comparison to developed markets. We develop the strategy on monthly basis in the period January, 2005 – March, 2017.
Keywords: market timing, alpha, active management, volatility
JEL Classification: G11, C22
Suggested Citation: Suggested Citation