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Journal of

Portfolio Management

Volume 18, Number 4 Summer 1992

Market Timing Works
Where it Matters Most...
in the Real World

Risk-adjusted returns show market timing at its best.

Jerry Wagner, Steve Shellans, and Richard Paul

Market timing's theoretical efficacy has been the focus of many studies (see Kester [1990] and Sy [1990], for example). Review of these articles suggests that, as the authors have adjusted their assumptions to reflect more closely the realities of trading, their results increasingly support market timing as an investment tool. Until now, however, there has been no empirical study of the market timers' track record. The purpose of this article is to apply the measurement tools of modern portfolio theory to the performance of a sample of real world market timers.


Since March of 1985, MoniResearch Corp. of Portland, Oregon, has published a newsletter monitoring the results of investment advisors who perform market-timing services for clients. Unlike market letter writers, these timers, by virtue of a limited power of attorney, actually implement timing strategies for their clients using, for the most part, no-load mutual funds. The result is a verifiable track record.

MoniResearch obtains continuous client statements from multiple mutual fund accounts for most timers monitored. It then extracts the buy and sell dates from each. In order to focus exclusively on the timing element and to create a level playing field, MoniResearch uses the S&P 500 with dividends reinvested as a surrogate for no-load mutual funds during buy signals. Following sell signals, it is assumed that investments are made in a medium yielding twenty-five basis points over the ninety-one-day T-bill rate (a proxy for a money market fund).

FPI 35th Anniversary

Since 1981, Flexible Plan Investments has been dedicated to preserving and growing wealth through dynamic risk management. We are a turnkey asset management program (TAMP), which means advisors can access and combine our many risk-managed strategies within a single account. Our fee-based separately managed accounts can provide diversified portfolios of actively managed strategies within equity, debt, and alternative asset classes on an array of different platforms. We also offer advisors our OnTarget Investing tool to help set realistic, custom benchmarks for clients and regularly measure progress. Read More...