n South African Journal of Business Management - The effects of bull and bear periods on market timing strategies

Volume 32, Issue 3
  • ISSN : 2078-5585


This study evaluates the perfonnance of traditional timing, bull timing (holding the risk-free asset and buying call options totake advantage of expected market rises) and bear timing (holding the market index and buying put options ahead of expectedmarket falls) strategies on the Johannesburg Stock Exchange during bullish and bearish market phases. Potential returns aswell as the forecasting ability required to outperfonn the ALSI are calculated.When the market is in a bullish phase, bear timing is the better strategy. However, in such a market, very high predictiveaccuracy (above 85 percent) is required from both bull and bear timers. In a bearish phase, however, bull timers performbetter than bear timers. The predictive ability required of bear timers is of the order of 65 percent. For bull timers thisrequired predictive accuracy drops below 50 percent, making it an extremely attractive strategy, provided the bear phases ofthe market can be predicted.

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