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Quantitative Equity Portfolio Management by Daehwan Kim, Ludwig B Chincarini

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APPENDIX 15DMeasuring Market Timing Ability

Although market timing is not usually the forte of the quantitative portfolio manager, there are performance measurement techniques to discover whether the portfolio manager has market timing ability as opposed to just general stock picking ability. Traditionally, these two components have been separated by running either of the following regressions:

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The α continues to measure portfolio selectivity performance, β continues to represent the market exposure of the portfolio, and a positive γ indicates ...

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