EFF: Wins and losses from market timing bets are both just unpredictable chance outcomes, and good luck is, of course, better than bad luck. The problem with market timing is that you may be out of the market in periods of strong returns.
KRF: There is a large academic literature on whether market returns are predictable. The general conclusion is that it is impossible to predict the market return with any confidence... "A Comprehensive Look at the Empirical Performance of Equity Premium Prediction," by Amit Goyal and Ivo Welch (Review of Financial Studies, 2008), is a good summary of the evidence.
If the market is not predictable, what is the harm in trying to market time? Suppose your optimal allocation is 70% equity and 30% bonds. Deviating from this allocation in an effort to time the market must make you worse off—otherwise it would not be your optimal allocation.
As Gene says, good luck is better than bad, and despite the apparent wisdom of the people who moved out of the market in May 2008, the academic evidence says they were simply the beneficiaries of good luck.
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Eugene Fama and Ken French are members of the Board of Directors of the general partner of, and provide consulting services to Dimensional Fund Advisors LP.