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Yup. And that's really hard to do, as evidence the agonized discussions here about getting out NOW!! because of the downdrafts & volatility. It's as if people can accept the concept of unemotional backtests for selecting stocks, but have a hard time applying the concept to in/out decisions.

It's perfectly rational to be less certain about the timing signals than about stock selection from screens. I don't think it's a psychology issue.

With stock picking from screens you're making a highly diversified decision. If you invest, let's say, 5% of your portfolio in each stock, the individual stock picking decisions carry little risk. Also, stocks prices are highly correlated in the short run. So picking stock A vs. stock B, as a localized decision, has little impact on your total portfolio performance. And the stock screen backtests have many sample points.

Timing signals, and the way they are used by many people, are very different. If you're going to go all in or all out based on a single signal, the decision has a large potential impact on your portfolio. By definition, high impact means high risk, and people sense that intuitively. There's also the matter of a sparse sample size for many of the timing signals. So it's not at all surprising to me that people who use signals for an all-in/all-out decision, have serious misgivings. They are being rational.

Elan
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