An Investigation of the Relationship between Stated Fund Management Policy and Market Timing Ability

Abstract

This paper examines the market timing ability of a sample of 62 Australian International equity funds using the returns‐based approach of Henriksson and Merton (1981) (H&M) and Treynor and Mazuy (1966) (T&M). Specifically, the primary focus is to investigate whether market timing ability bears any relationship to the stated fund allocation policy. Generally, the results indicate that fund managers do not successfully time the market. We also find that there is no relationship between the manager's stated level of activity on allocation and their market timing abilities as calculated using the H&M and T&M models. Managers are not successfully implementing their stated policies. These results are consistent with an irrelevance of perceived management style to fund policies and hence performance. Furthermore, it is indicative that fund managers are not successfully targeting particular classes of risk averse investors.

Citation

Benson, K., Pope, P. and Faff, R. (2003), "An Investigation of the Relationship between Stated Fund Management Policy and Market Timing Ability", Pacific Accounting Review, Vol. 15 No. 1, pp. 1-15. https://doi.org/10.1108/eb037969