A global approach to mutual funds market timing ability

Laurent Bodson, Laurent Cavenaile and Danielle Sougné

Journal of Empirical Finance, 2013, vol. 20, issue C, 96-101

Abstract: In this paper, we globally investigate market timing abilities of mutual fund managers from the three perspectives: market return, market-wide volatility and aggregate liquidity. We propose a new specification to study market timing. Instead of considering an average market exposure for mutual funds, we allow mutual fund market betas to follow a random walk in the absence of market timing ability. As a consequence, we capture market exposure dynamics which is really due to manager market timing skills while allowing dynamics to come from other sources than market timing. We find that on average 6% of mutual funds display return market timing abilities while this percentage amounts to respectively 13% and 14% for volatility and liquidity market timing. We also analyze market timing by investment strategies and for surviving and dead funds. Dead funds exhibit lower volatility and liquidity timing skills than live funds.

Keywords: Mutual fund; Market timing; Market return; Volatility; Liquidity (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:20:y:2013:i:c:p:96-101

DOI: 10.1016/j.jempfin.2012.11.001

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