The liquidity timing ability of mutual funds

Zhengnan Yin, O’Sullivan, Niall and Meadhbh Sherman

The North American Journal of Economics and Finance, 2024, vol. 74, issue C

Abstract: We apply the nonparametric methodology of Jiang (2003) to test the market liquidity timing skills across individual equity mutual funds in three countries (the US, UK, and China). We calculate the monthly stock market liquidity using simple averages (across stocks) as well as the asymptotic principal component analysis (APCA) method based on six stock liquidity measures. Using an across-measure of market liquidity from APCA, we find a relatively small number of funds demonstrate statistically positive liquidity timing skills at a 5% significance level for the period of 2000–2021. After controlling for lagged market liquidity information, we still find a small number of mutual funds that have conditional liquidity timing ability using the nonparametric method.

Keywords: Mutual fund performance; Liquidity timing; Liquidity; Principal component analysis; Nonparametric test (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G23 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:74:y:2024:i:c:s1062940824001268

DOI: 10.1016/j.najef.2024.102201

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