Can mutual fund managers time commonality in stock market misvaluation?

Yao Zheng, Eric Osmer and Liancun Zheng

Journal of Economics and Business, 2021, vol. 117, issue C, No S0148619521000369

Abstract: This study analyzes whether mutual fund managers possess skill in timing stock market misvaluation. We find that managers successfully increase their market exposure when there is more systematic underpricing. Managers in the top misvaluation timing decile outperform ones in the bottom decile by approximately 3% per year. These results remain robust in the subperiod and exclusion of crisis periods analyses. A fund characteristic analysis shows that younger and smaller funds, and funds with a high turnover ratio tend to increase fund exposure to the market when there is more aggregate misvaluation present in the stock market.

Keywords: Commonality; Misvaluation; Fund characteristics; Mutual funds; Timing ability (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:117:y:2021:i:c:s0148619521000369

DOI: 10.1016/j.jeconbus.2021.106018

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