Market Timing Methods and Results

Abstract Market timing is the investment strategy occurring when investors increase their allocation in risky assets in periods of bull markets. This chapter provides an overview of market timing methods and explains the concepts that modelers and finance practitioners use professionally in the world of investments. The beauty of trading is the ease of applying a predefined set of trading rules in order to identify market trends. The chapter also describes the set of indicators and the conditions needed for each strategy to be profitable and the outcome of each of strategy. In recent years, quantitative trading has been one of the most applicable ways of investing. Recent evidence shows that a successful quantitative strategy is linked to relative pricing. Thus, this chapter focuses on several mean-reversion strategies that depend on time-varying relative returns and volatilities.