Market timing: A decomposition of mutual fund returns

Laurens Swinkels, Pieter van der Sluis and Marno Verbeek ()

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: We decompose the conditional expected mutual fund return in five parts. Two parts, selectivity and expert market timing, can be attributed to manager skill, and three to variation in market exposure that can be achieved by private investors as well. The dynamic model that we use to estimate the relative importance of the components in the decomposition is a generalization of the performance evaluation models by Lockwood and Kadiyala (1988) and Ferson and Schadt (1996). We find that the restrictions imposed in existing models may lead to different inferences about manager selectivity and timing skill. The results from our sample of 78 asset allocation mutual funds indicate that several funds exhibit significant expert market timing, but for most funds variation in market exposures does not yield any economically significant return. Funds with high turnover and expense ratios are associated with managers with better skills.

Keywords: market timing; mutual funds; pensioenfondsen; performance evaluation (search for similar items in EconPapers)
JEL-codes: G23 G3 M M41 (search for similar items in EconPapers)
Date: 2003-10-20
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repub.eur.nl/pub/978/ERS%20074.pdf (application/pdf)

Related works:
Working Paper: Market Timing: A Decomposition of Mutual Fund Returns (2003)
Working Paper: Market Timing: A Decomposition of Mutual Fund Returns (2003)
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:ems:eureri:978

Access Statistics for this paper

More papers in ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam Contact information at EDIRC.
Bibliographic data for series maintained by RePub ().