The Delivery of Market Timing Services: Newsletters Versus Market Timing Funds
NBER Technical Working Paper No. 75
This paper examines the dissemination of market timing information (signals on the overall performance of risky assets relative to the risk free rate). We consider two delivery systems. Under the newsletter delivery system market timing information is disseminated solely through newsletter. Under the fund delivery system, timers set up timing funds in which investors can invest. In the absence of market imperfections we find that both systems produce the same result. With restrictions on borrowing or with other nonlinearities we find the newsletter system to be superior. This is one possible explanation for the plethora of market timing newsletters and the paucity of market timing funds.
Published: Journal of Financial Intermediation, Vol. 1, No. 1, pp. 150-166, (1990).