Conditional Market Timing in the Mutual Fund Industry PDF Download
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Author: Vanessa S. Tchamyou
Publisher:
ISBN:
Category :
Languages : en
Pages : 20
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Book Description
This study complements the scarce literature on conditional market timing in the mutual fund industry by assessing determinants of market timing throughout the distribution of market exposure. It builds on the intuition that the degree of responsiveness by fund managers to investigated factors (aggregate liquidity, information asymmetry, volatility and market excess return) is contingent on their levels of market exposure. To this end, we use a panel of 1467 active open-end mutual funds for the period 2004-2013. Fund-specific time-dynamic beta is employed and we avail room for more policy implications by disaggregating the dataset into market fundamentals of: equity, fixed income, allocation and tax preferred. The empirical evidence is based on Quantile regressions. The following findings are established. First, there is consistent positive threshold evidence of volatility and market return in market timing, with the slim exception of allocation funds for which the pattern of volatility is either U- or S-shaped. Second, the effect of volatility and market return are consistently positive and negative respectively in the bottom and top quintiles of market exposure, but for allocation funds. Third, the effects of information asymmetry and aggregate liquidity are positive and negative, contingent on specifications, level of market exposure and market fundamentals. The findings broadly suggest that blanket responses of market exposures to investigated factors are unlikely to represent feasible strategies for fund managers unless they are contingent on initial levels of market exposure and tailored differently across 'highly exposed'-fund managers and 'lowly exposed'-fund managers. Implications for investors and fund managers are discussed.
Author: Vanessa S. Tchamyou
Publisher:
ISBN:
Category :
Languages : en
Pages : 20
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Book Description
This study complements the scarce literature on conditional market timing in the mutual fund industry by assessing determinants of market timing throughout the distribution of market exposure. It builds on the intuition that the degree of responsiveness by fund managers to investigated factors (aggregate liquidity, information asymmetry, volatility and market excess return) is contingent on their levels of market exposure. To this end, we use a panel of 1467 active open-end mutual funds for the period 2004-2013. Fund-specific time-dynamic beta is employed and we avail room for more policy implications by disaggregating the dataset into market fundamentals of: equity, fixed income, allocation and tax preferred. The empirical evidence is based on Quantile regressions. The following findings are established. First, there is consistent positive threshold evidence of volatility and market return in market timing, with the slim exception of allocation funds for which the pattern of volatility is either U- or S-shaped. Second, the effect of volatility and market return are consistently positive and negative respectively in the bottom and top quintiles of market exposure, but for allocation funds. Third, the effects of information asymmetry and aggregate liquidity are positive and negative, contingent on specifications, level of market exposure and market fundamentals. The findings broadly suggest that blanket responses of market exposures to investigated factors are unlikely to represent feasible strategies for fund managers unless they are contingent on initial levels of market exposure and tailored differently across 'highly exposed'-fund managers and 'lowly exposed'-fund managers. Implications for investors and fund managers are discussed.
Author: Connie Becker
Publisher:
ISBN:
Category : Benchmarking (Management)
Languages : en
Pages : 42
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Book Description
Abstract: This paper tests models of mutual fund market timing that (1) allow the manager's utility function to depend on returns in excess of a benchmark; (2) distinguish timing based on lagged, publicly available information variables from timing based on finer information; and (3) simultaneously estimate the parameters which describe the public information environment, the risk aversion and the precision of the fund's market timing signal. Using a sample of more than 400 U.S. mutual funds for 1976-94, the estimates imply that mutual funds behave as risk averse, benchmark investors. Conditioning on public information variables improves the model specification, and after controlling for the public information we find no evidence that funds have significant market timing ability.
Author: Jeffrey A. Busse
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
We examine mutual fund market timing based on beta asymmetry from dynamic conditional correlation (DCC) model. We find significant timing using daily returns rather than monthly returns. The sensitivity of our findings to data frequency is consistent with funds altering their market exposure at a greater frequency than can be precisely captured by monthly returns. Timing evidence is stronger during down markets, when the gains associated with market timing are especially meaningful. Successful market timers earn significant abnormal returns and attract greater investor cash flows than non-timers. Holding diversified portfolios and short selling help facilitate market timing.
Author: Haim Reisman
Publisher:
ISBN:
Category :
Languages : en
Pages : 13
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Book Description
The paper derives a measure for evaluation of performance of mutual funds in an environment where mutual fund managers are using conditioning information, returns are conditionally normally distributed, and investors have exponential utility functions. The ranking obtained is consistent with the choice of investors who i) wish to invest in only one risky fund and in the risk free asset, and ii) are not using conditioning information, used by the fund's manager, when optimally mixing their risky fund with the risk free asset. The ranking obtained is the same as the one obtained by the Sharpe measure in the case where fund managers are not using conditioning information, and it is different otherwise. A by-product of the analysis is the quot;positive period weighting measurequot; proposed by Grinblatt and Titman (1989) as an alternative to the Jensen measure in an environment where portfolio managers are using conditioning information.
Author: Javier Vidal-García
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In this paper we examine whether mutual fund managers around the world are able to implement synchronization strategies with respect to different investment styles, a fundamental aspect in the efficient management of an investment portfolio. We also analyze the skills of these managers to properly select stocks that make up their portfolios. For this purpose, we use a sample of equity mutual funds registered in 35 countries around the world for the 1990-2021 period, for our analysis we employ multifactor and conditional versions of the market timing models of Treynor and Mazuy, and Henriksson and Merton. The results obtained are very similar across countries. We find a correct stock selection and synchronization skills with respect to the book-to-market style and a negative ability to synchronize size and 1-year momentum investment styles.
Author: Laurens Swinkels
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
We decompose the conditional expected mutual fund return in five parts. Two parts, selectivityand expert market timing, can be attributed to manager skill, and three to variation in marketexposure that can be achieved by private investors as well. The dynamic model that we use toestimate the relative importance of the components in the decomposition is a generalization ofthe 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 inferencesabout manager selectivity and timing skill. The results from our sample of 78 asset allocationmutual funds indicate that several funds exhibit significant expert market timing, but for mostfunds variation in market exposures does not yield any economically significant return. Fundswith high turnover and expense ratios are associated with managers with better skills.
Author: Wilfred L. Dellva
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
In this paper, we test the selectivity and timing performance of the Fidelity sector mutual funds during the 1989-1998 time period. We use the Samp;P 500, the Dow Jones Industry Group Total Return Indexes, and the Dow Jones Subgroup Total Return Indexes as benchmarks. When we use the Dow Jones Industry benchmarks, our results indicate that many sector fund managers have positive selectivity but negative timing ability. We also find that the results are sensitive to our choice of benchmark and timing model.
Author: John R. Graham
Publisher:
ISBN:
Category : Investment advisors
Languages : en
Pages : 68
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Book Description
Author: Frank Coggins
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
The empirical results in recent finance literature reveal that conditional performance measures generally improve our perception of fund managers. Furthermore, it has been shown that using daily data in an unconditional framework increases the proportion of abnormal performances relative to timing. This paper compares daily conditional and unconditional performance measures of Jensen (1968) and Treynor and Mazuy (1966). In a conditional bivariate GARCH framework, while our daily selectivity results are consistent with those in previous studies based on monthly data, our daily timing results show that the proportion of abnormal performance diminishes significantly when conditional risk methods are used. This result supports the general idea that returns cannot be used to assess managerial skills.
Author: Jason Foran
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
We investigate both market volatility timing and market liquidity timing for the first time among UK mutual funds. We find strong evidence that a small percentage of funds time market volatility successfully, i.e., when conditional market volatility is higher than normal, systematic risk levels are lower. The evidence around market liquidity timing ability is similar although it is slightly less prevalent compared to volatility timing. Here, funds lower the fund market beta in anticipation of reduced market liquidity. We also find a positive relation between liquidity timing ability and fund abnormal performance where skilled liquidity timers outperform unskilled timers by around 3% p.a. - though this finding is driven by poor liquidity timing funds going on to yield negative alpha. However, despite the evidence of volatility and liquidity timing ability among funds, we fail to find in support of persistence in this timing. We find little evidence supporting market return timing ability.
