A Structural Model of Dynamic Market Timing: Theory and Estimation
Boston University - Department of Finance & Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO)
Boston University School of Management - Finance and Economics Department; Center for Interuniversity Research and Analysis on Organization (CIRANO)
April 17, 2012
Paris December 2012 Finance Meeting EUROFIDAI-AFFI Paper
This paper derives and analyzes dynamic timing strategies of a fund manager with private information. Endogenous timing strategies generated by various information structures and skills, and associated fund styles are identified. Endogenous fund returns are characterized in the public information of an uninformed observer. Econometric methods for style analysis are developed.
New tests of timing skill are proposed and their detection ability is analyzed. An application to a universe of hedge fund indices shows significant timing ability in specific categories of hedge fund styles.
Number of Pages in PDF File: 66
Keywords: Structural Model, Active Fund Management, Private Information, Market Timing, Dynamic Trading, Selection, Return Structure, Timing Claim, Econometric Method, Tests of Timing Skill, Test Power, Empirical Application
JEL Classification: G11working papers series
Date posted: June 12, 2012 ; Last revised: January 26, 2013
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