Title: Market-timing in practice
Authors: Michael Scholz - University of Graz (Austria) [presenting]
Jens Perch Nielsen - Cass Business School (United Kingdom)
Stefan Sperlich - University of Geneva (Switzerland)
Enno Mammen - University of Heidelberg (Germany)
Abstract: In long-term investment products, it is important to understand the underlying financial risk of the optimal investment profile. Various performance measures, for example, the Sharpe-ratio, were proposed to evaluate those investment strategies in practice. We provide an improved estimator for the Sharpe-ratio which includes prior knowledge in the estimation process of conditional mean and variance function in a predictive regression model focusing on nonlinear relationships between a set of covariates. In an applied part, we compare different investment strategies based on our improved estimators using annual data of the S\&P500 in a period from 1872 to 2015.