Timing and Sizing Skills of Systematic Strategies across Time and Economic Regimes

Abstract

The authors first characterize a variety of systematic strategies in terms of timing and sizing skills based on their frequencies and magnitudes of gains and losses over time and then move on to analyze how these characteristics differ over macroeconomic regimes, such as inflationary and recessionary periods. The results are based on new methodologies for significance testing of gain- and loss-based performance measures and complement previous results based on analysis of the Sharpe ratio of these strategies. The empirical results have implications for outcome-orientated portfolio construction as well as strategic and tactical asset allocation, because strategies that have desirable properties—as well as strategies with problematic performance—are identified under each regime. This approach also allows for identification and attribution of the inherent sources of these differences.