Do mutual fund managers time market liquidity?

Charles Cao, Timothy T. Simin and Ying Wang

Journal of Financial Markets, 2013, vol. 16, issue 2, 279-307

Abstract: This paper examines mutual fund managers' ability to time market-wide liquidity. Using the CRSP mutual fund database, we find strong evidence that over the 1974–2009 period, mutual fund managers demonstrate the ability to time market liquidity at both the portfolio level and the individual fund level. Liquidity timing predicts future fund performance and the difference in the risk-adjusted returns between top and bottom liquidity-timing funds is approximately 2% per year. Funds exhibiting liquidity-timing ability tend to have longer histories, higher expense ratios, and higher turnover rates.

Keywords: Liquidity timing; Mutual fund performance; Market liquidity; Bootstrap (search for similar items in EconPapers)
JEL-codes: G11 G19 G23 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:16:y:2013:i:2:p:279-307

DOI: 10.1016/j.finmar.2012.10.004

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