We thank Jennifer Chou, Ramie Fernandez, David Tien, Jack Wilson (referee), and especially Sridhar Chilukuri. Meir Statman acknowledges financial support from The Dean Witter Foundation.
MARKET TIMING IN REGRESSIONS AND REALITY
Article first published online: 27 JUL 2006
Journal of Financial Research
Volume 29, Issue 3, pages 293–304, Fall 2006
How to Cite
Fisher, K. L. and Statman, M. (2006), MARKET TIMING IN REGRESSIONS AND REALITY. Journal of Financial Research, 29: 293–304. doi: 10.1111/j.1475-6803.2006.00179.x
- Issue published online: 27 JUL 2006
- Article first published online: 27 JUL 2006
We compare price-to-earnings ratios and dividend yields, which are indirect measures of sentiment, with the bullish sentiment index, which is a direct measure. We find that the sentiment index does better as a market-timing tool than do P/E ratios and dividend yields, but none is very reliable. We do not argue that market timing is impossible. Rather, we observe that stock prices reflect both sentiment and value, both of which are difficult to measure and neither of which is perfectly known in foresight. Successful market timing requires insights into future sentiment and value, insights beyond those that are reflected in widely available measures.