Do Mutual Funds Time the Market? Evidence from Portfolio Holdings
George J. Jiang
Washington State University
University of Iowa - Henry B. Tippie College of Business
University of Rhode Island - College of Business Administration
October 1, 2006
AFA 2005 Philadelphia Meetings Paper
Journal of Financial Economics (JFE), Vol. 86, 2007
Previous research finds insignificant market-timing ability for mutual funds using tests based on fund returns. The return-based tests, however, are subject to the ‘‘artificial timing’’ bias. In this paper, we propose and implement new measures of market timing based on mutual fund holdings. Our holdings-based measures do not suffer from the artificial timing bias. We find that, on average, actively managed U.S. domestic equity funds have positive timing ability. Market timing funds use non-public information to predict market returns, tend to have high industry concentration, large fund size, a tilt toward small-cap stocks, and are active in industry rotation.
Number of Pages in PDF File: 36
Keywords: market timing, mutual fund
JEL Classification: G10Accepted Paper Series
Date posted: January 16, 2005 ; Last revised: February 20, 2013
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