Timing versus Sizing Skill in the Investment Process

摘要

In Timing versus Sizing Skill in the Investment Process, published in the Winter 2018 issue of The Journal of Portfolio Management, Ronald van Loon of BlackRock decomposes risk-adjusted investment performance into three components: (ⅰ) skill in investment selection, (ⅱ) skill in investment sizing, and (ⅲ) the number of independent investment decisions taken. Selection skill is measured in terms of the number of winning investment decisions as a proportion of all investment decisions. Sizing skill is measured as the ratio of the average return on winning decisions to the average return on losing decisions.Based on a theoretical analysis confirmed by empirical results and simulation testing, van Loon concludes that, from the standpoint of an unskilled investor, improving skill in market timing is about twice as valuable as improving skill in sizing positions.