Market Timing with Aggregate and Idiosyncratic Stock Volatilities

摘要

There is some evidence that aggregate stock market volatility and average idiosyncratic stock volatility jointly forecast stock returns. Is this result economically significant? Evaluation of the performance of a mean-variance manager who tries to time the market using those two variables. over 1968-2004 indicates the resulting market timing strategy outperforms the buy-and-hold strategy. The difference is statistically and economically significant.