Coskewness timing ability in the mutual fund industry

Woraphon Wattanatorn and Chaiyuth Padungsaksawasdi

Research in International Business and Finance, 2020, vol. 53, issue C

Abstract: The ability of mutual fund managers to time coskewness successfully can help them manage their portfolio’s exposure to potential losses and improve their fund’s performance. This study assesses whether mutual fund managers are able to manage the market exposure of their investment portfolios given a change in coskewness. We demonstrate that fund managers investing in Small Blend and Small Growth stocks possess the ability to time coskewness. On average, the fund managers of these two investment objectives increase the market exposures of their portfolios about 2.749 % and 1.340 %, respectively, based on their anticipations on future coskewness. Superiority is driven from the fact that the fund managers in small capitalization stocks are successfully able to manage the tail risk of their funds’ portfolios. The fund-by-fund results confirm that the number of individual funds succeeding in timing market skewness of the Small Blend and Small Growth investment objectives is larger than the remaining types. The main findings are robust when controlling for other types of timing ability, the periods of financial turbulence, and the construction of coskewness.

Keywords: Coskewness timing; Mutual fund performance; Timing abilities; Higher moment (search for similar items in EconPapers)
JEL-codes: G11 G12 G21 G23 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:53:y:2020:i:c:s0275531919307202

DOI: 10.1016/j.ribaf.2020.101224

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