Dynamic Market Timing in Mutual Funds

Jeffrey A. Busse (), Jing Ding (), Lei Jiang () and Ke Wu ()
Additional contact information
Jeffrey A. Busse: Goizueta Business School, Emory University, Atlanta, Georgia 30322
Jing Ding: School of Economics & Management, Tongji University, Shanghai 200092, China
Lei Jiang: Tsinghua University, Beijing 100084, China; Kent State University, Kent, Ohio 44242
Ke Wu: School of Finance, Renmin University of China, Beijing 100872, China

Management Science, 2024, vol. 70, issue 6, 3470-3492

Abstract: We use the dynamic conditional correlation (DCC) model to estimate daily frequency mutual fund betas. Compared with traditional estimates, daily betas better capture changes in fund risk stemming from daily fund trading activity. Based on these beta estimates and a two-stage estimation procedure, we find significant evidence of market timing ability among actively managed U.S. equity funds that is not apparent via standard approaches. Unlike traditional measures, our timing estimates correlate positively with fund performance. Market timing is especially evident during down markets, with successful timers exhibiting low downside risk. Timing ability persists across time and attracts investor flows.

Keywords: mutual funds; market timing; dynamic conditional correlation (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2023.4857 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:6:p:3470-3492

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().