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MARKET TIMING IN REGRESSIONS AND REALITY
Author(s) -
Fisher Kenneth L.,
Statman Meir
Publication year - 2006
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2006.00179.x
Subject(s) - market sentiment , economics , index (typography) , econometrics , measure (data warehouse) , dividend , value (mathematics) , earnings , financial economics , stock market , computer science , statistics , mathematics , accounting , finance , data mining , paleontology , horse , biology , world wide web
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.