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1 – 10 of over 155000Richard Danquah and Baorong Yu
The study assess the selection ability and market timing skills of mutual fund and unit trust managers in Ghana.
Abstract
Purpose
The study assess the selection ability and market timing skills of mutual fund and unit trust managers in Ghana.
Design/methodology/approach
The study uses an improved survivorship bias-free dataset of yearly after-fee returns of all mutual funds and unit trusts operating in Ghana from January 2011 to December 2019, cumulating in nine years of quantitative fund data. The authors assess Mutual funds and Unit trusts that ever existed, “alive” or “dead,” over the sample period in the study. The authors construct factor loadings to enable the application of multifactor models in the analysis. The authors apply the unconditional versions of the Jensen alpha, Fama-French three-factor, and Carhart four-factor models to determine the selection ability and market timing skills of 32 mutual funds and 17 unit trusts. The authors deploy HAC-consistent robust standard errors to the OLS estimations to subdue the effect of heterogeneity and autocorrelation.
Findings
The results indicate that, on average, mutual funds and unit trust managers possess market timing skills but no selection ability. When the results are decomposed into fund types, fixed-income and balanced mutual fund managers possess selection ability and market timing skills.
Originality/value
To the authors' best knowledge, this study is the earliest to examine the selection ability and market timing skills of both mutual fund and unit trust managers in Sub-Saharan Africa (SSA). It is also the earliest to construct factor loadings for the Ghana stock market.
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This study aims to examine whether mutual funds can earn daily alpha and time daily market return.
Abstract
Purpose
This study aims to examine whether mutual funds can earn daily alpha and time daily market return.
Design/methodology/approach
Based on the Treynor and Mazuy (1966) model and the Henriksson and Merton (1981) model, the author tests the daily market-timing ability of actual mutual funds and bootstrapped mutual funds.
Findings
The author finds that daily alpha and daily market-timing ability can come from pure luck. In addition, the relation between fund alpha and market-timing ability is at best minimal.
Originality/value
Using bootstrapped funds as the benchmark, this study shows that daily fund market is overall efficient.
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Richard J. Buttimer, Jun Chen and I‐Hsuan Ethan Chiang
The purpose of this paper is to study performance and market timing ability of equity real estate investment trusts (REITs).
Abstract
Purpose
The purpose of this paper is to study performance and market timing ability of equity real estate investment trusts (REITs).
Design/methodology/approach
The authors use classical regression‐based framework and their multi‐index, multifactor, and conditional extensions to jointly detect asset selectivity and market timing ability of equity REITs and their subcategories. These results are then validated by a nonparametric test.
Findings
It is found that equity REITs in aggregate have some housing market timing ability. Various equity REIT subcategories perform differently: office REITs can discover underpriced properties, while retail, industrial, and office REITs have poor timing ability. Nonparametric tests confirm that equity REITs do not have ability to predict real estate market movements.
Originality/value
Research in REIT performance evaluation is still limited to the asset selectivity aspect. This paper intends to fill this gap by providing empirical evidence of market timing ability of equity REITs using an array of parametric and nonparametric methods.
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Hale Yalcin and Sema Dube
The authors examine whether Turkish fund managers employ liquidity timing along with market return timing, and if additional economic and market factors could affect their timing…
Abstract
Purpose
The authors examine whether Turkish fund managers employ liquidity timing along with market return timing, and if additional economic and market factors could affect their timing abilities, to help explain the contradictory results in literature vis-a-vis market timing ability.
Design/methodology/approach
The authors apply panel data analyses, with interaction terms and incorporating structural breaks, to monthly data for 96 out of 131 Turkish variable mutual funds which have available data for the sample period of 2011–2018. The authors employ the Amihud (2002) illiquidity measure to study market liquidity timing ability along with how additional economic and market factors affect this ability.
Findings
The authors find liquidity timing to be the performance enhancing method employed by Turkish variable fund managers in conjunction with market timing and that evidence for market timing may depend on whether structural breaks, that may be present in returns, are incorporated in the analysis. The authors also find that economic, technology and market-related factors affect timing abilities of fund managers.
Research limitations/implications
Conclusions are for Turkey, for the sample period studied, and for the control factors selected based on literature.
Practical implications
It is important to understand the role of market liquidity in making investment decisions and the paper contributes toward an understanding of how managers design their timing strategies in order to enhance portfolio performance, as well as the impact of additional factors on their ability to time market returns and liquidity. This is also important for evaluating fund managers' performance in terms of contribution to portfolio value.
Originality/value
To the authors knowledge this is the first study on Turkish markets to employ liquidity timing in the context of panel data analyses using interaction terms, as well as structural breaks, to distinguish the extent of liquidity timing from return timing, while incorporating the effect of additional factors on timing ability.
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Qiang Bu and Nelson Lacey
The purpose of this study is to examine the market‐timing ability of mutual fund flows and how fund investors conduct asset allocation in response to market volatility.
Abstract
Purpose
The purpose of this study is to examine the market‐timing ability of mutual fund flows and how fund investors conduct asset allocation in response to market volatility.
Design/methodology/approach
The paper compares the abnormal returns of net inflow funds with those of net outflow funds, and it explores the performance gap between them based on a model that incorporates both market return timing and market volatility timing. The asset allocation pattern of fund investors and its relation to market volatility are also investigated.
Findings
This study finds that funds that receive net money inflows fail to earn risk‐adjusted abnormal returns, while funds with net outflows earn statistically significant negative abnormal returns. Neither the net inflow funds nor the net outflow funds show any ability to time the market return, but there is some evidence that net inflow funds exhibit an ability to time market volatility. Because cash holdings of the net outflow funds are much lower than that of the net inflow funds, it is concluded that the underperformance of net outflow funds is to an extent an asset fire sale.
Research limitations/implications
The study results show that fund investors on the whole are driven by market volatility, and they do not have an ability to time the market return. The results do not exclude the possibility that a small number of investors possess market timing skills.
Originality/value
The study demonstrates the importance of funds' liquidity management through investor reaction to dynamic market conditions.
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Praveen K. Das and S. P. Uma Rao
The purpose of this paper is to examine the market timing and stock selection abilities of socially responsible (SR) mutual funds. Some high-profile SR fund managers try to…
Abstract
Purpose
The purpose of this paper is to examine the market timing and stock selection abilities of socially responsible (SR) mutual funds. Some high-profile SR fund managers try to embrace market timing and security selection plans to add value to the performance. Market timing relies on forecasting the equity market and shifting assets into or out of the market in anticipation of market movements. The selectivity measure assesses fund managers ability to select undervalued securities. Furthermore, the authors examine whether fund characteristics play any role in market timing and security selection ability.
Design/methodology/approach
The authors use Treynor and Mazuy's’ (1966) and Henriksson and Mertons’ (1981) model to examine the market timing and security selection ability. The study uses a decade of monthly returns to examine the skills of fund managers in the SR industry for the period from July 2002 to June 2012.
Findings
The main findings are that the managers – though not very successful – do indulge in stock selection and market timing activities. It was found that 48 funds have positive statistically significant stock selectivity coefficients and only a very small number of five funds with positive statistically significant market timing coefficients. Results suggest that there is a trade-off between the two activities. It was found that aggressive funds, funds with higher growth rate and riskier funds are more likely to engage in market timing rather than stock selection.
Practical implications
The implication is that SR managers cannot achieve superior stock selection and market timing ability simultaneously. Risk-averting investors in SR funds expect SR behavior from the managers. This means that managers of SR funds, with very little evidence of market timing ability, may have to refrain from market timing of SR funds.
Originality/value
Using a Morningstar dataset comprising almost all SR funds in existence as of June 2012, this is probably the most exhaustive long-term study to date on market timing and stock selection abilities of SR fund managers.
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Karen Benson, Peter Pope and Robert Faff
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…
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.
Abhay Kaushik, Anita Pennathur and Scott Barnhart
Market‐timing skills of fund managers are an important issue for both mutual fund investors and researchers. The purpose of this paper is to analyze the market‐timing skills and…
Abstract
Purpose
Market‐timing skills of fund managers are an important issue for both mutual fund investors and researchers. The purpose of this paper is to analyze the market‐timing skills and determinants of performance of sector funds across business cycles to see whether sector fund managers exhibit different market‐timing abilities across business cycle.
Design/methodology/approach
Single factor, five‐factor conditional and five‐factor unconditional models were used to estimate the initial results for market timing of sector funds across the business cycle. Monthly data such as returns, Fama and French factors, and fund specific variables of sector funds from January 1990 to December 2005 were used to estimate initial and cross‐sectional results. Cross‐sectional analyses were done using two approaches: the traditional approach where alpha, the dependent variable, is estimated assuming that betas of predicting variables remain constant over time, and where alpha is estimated assuming that betas do change over time. Estimated alpha was estimated as a function of fund specific variables to examine which fund specific variables influence fund abnormal performance across the overall, recessionary, and expansionary periods.
Findings
The benchmark used in the analysis (S&P vs sector specific) was shown to greatly influence the results. Sector funds demonstrate positive timing ability during recessions and negative timing ability during expansions when using the S&P 500 as the benchmark, but this timing ability disappears when sector specific benchmarks are used. As a whole, sector funds exhibit significant negative timing ability across all stages of the business cycle. When using the more appropriate industry specific benchmarks, only the utility sector demonstrates significant timing ability over both stages of the business cycle.
Research limitations/implications
Only two recessions are observed over the period of study. More recession periods would have given a clearer picture of findings across business cycle.
Practical implications
This paper offers readers an insight into the market‐timing abilities of sector fund managers across the business cycles. Investors can use the findings of this paper to develop hedging strategies especially when the economy is going through recession.
Originality/value
This paper covers the longest period of sector funds market timing and is the only one that evaluates sector funds across business cycle.
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Zia-ur-Rehman Rao, Muhammad Zubair Tauni, Amjad Iqbal and Muhammad Umar
The purpose of this paper is to find whether Chinese equity funds outperform the market and do Chinese fund managers possess positive market timing ability. This study also aims…
Abstract
Purpose
The purpose of this paper is to find whether Chinese equity funds outperform the market and do Chinese fund managers possess positive market timing ability. This study also aims to investigate whether well-performing (worst) funds of last year continue to perform well (worst) in the following year.
Design/methodology/approach
Capital Asset Pricing Model and Carhart four-factor model are used for performance analysis, whereas for analyzing market timing ability, the Treynor and Mazuy (1966) and Henriksson and Merton (1981) models are applied. To investigate persistence in the performance of Chinese equity funds, all equity funds are divided, on the basis of performance in the past 12 months, into three equally weighted groups (high, middle and low) and then observed for next 12 months. After that, groups are again rebalanced according to their performance. This study uses a panel regression model for analysis.
Findings
Chinese equity funds are successful in providing higher than market returns, and fund managers possess positive market timing ability. The authors find that Chinese equity funds do not show persistence in performance as witnessed in developed markets. Well-performing funds (worst funds) of last year do not continue to provide higher (lower) return in the following year. Moreover, the authors detect positive relationship of fund size, age and expense ratio with the fund’s performance. Overall results suggest that emerging market equity funds show better performance than that of developed markets.
Practical implications
Investors are better off if they invest in equity funds instead of index funds, as results illustrate that equity funds outperformed the market. Further, the strategy of buying well-performing funds of last year and selling poorly performing funds of last year does not look very attractive in China. This study helps investors to understand the Chinese managed funds industry, and such an understanding is also helpful for fund managers and asset management companies who use performance information in marketing strategies.
Originality/value
This is the first study to investigate the performance persistence in Chinese equity funds and also contributes to the literature about the performance and market timing ability of equity funds. The study takes the sample of 520 equity funds for the period from 2004 to 2014, which includes a period of financial crisis of 2008.
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Nuno Manuel Veloso Neto, Júlio Fernando Seara Sequeira da Mota Lobão and Elisabete Simões Vieira
This study aims to evaluate the performance of the Portuguese fund managers by examining the selectivity and market timing skills of 51 Portuguese mutual funds from June 2002 to…
Abstract
Purpose
This study aims to evaluate the performance of the Portuguese fund managers by examining the selectivity and market timing skills of 51 Portuguese mutual funds from June 2002 to March 2012.
Design/methodology/approach
The authors assess empirically the performance of a sample of funds by applying the unconditional and conditional models of Treynor and Mazuy (1966) and Henriksson and Merton (1981).
Findings
The results suggest that, overall, the Portuguese mutual funds do not possess selectivity or timing skills. However, regardless of the model used, the domestic equity funds exhibit a statistically significant market timing ability. Furthermore, the domestic and North American equity funds display positive selectivity during bull markets and timing skills during bear markets. Additionally, there is some evidence that older funds are better stock pickers than younger funds.
Research limitations/implications
To address some of the limitations of this study, the authors suggest for further research correcting the Treynor and Mazuy (1966) model for the convexity cost of replicating Merton’s (1981) option approach. Additionally, for further research, we suggest using a bigger sample, higher frequency data, as such data may lead to higher frequency of timing ability as proposed by Bollen and Busse (2001). To overcome some of the limitations of traditional models, future research may consider using Jiang’s (2003) nonparametric test, as it is not affected by manager’s risk aversion, or Ferson and Khang (2002) conditional performance evaluation using portfolios holdings.
Originality/value
The authors contribute to the current literature by extending the period of study to 10 years in comparison to previous studies; extending the sample of funds to 51; addressing, for the first time in this context, the importance of public information on funds’ performance, through the comparison of unconditional and conditional models of Treynor and Mazuy’s (1966) and Henriksson and Merton’s (1981); and, for the first time in the Portuguese context, analysing the relationship between funds’ size, age and market cycles and selectivity and market timing skills.
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