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Monthly Measurement of Daily Timers

William N. Goetzmann
Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Jonathan E. Ingersoll Jr. Jr.
Yale School of Management - International Center for Finance

Zoran Ivkovich
Michigan State University, Department of Finance


November 14, 1998


Abstract:     
This paper addresses the bias associated with parametric measurement of timing skill based on monthly timer returns when timers can make daily timing decisions. Simulations suggest that the classic Henriksson-Merton parametric measure of timing skill is weak and biased downward when applied to the monthly returns of a daily timer. The paper proposes an adjustment that mitigates this problem without the need to collect daily timer returns. Four tests of timing skill, carried out on a sample of 558
mutual funds, show that very few funds exhibit statistically significant timing skill. More encompassing, the adjusted-FF3 test (based on the specification that incorporates both the proposed adjustment and the Fama-French three-factor model) is the least biased measure of timing skill among the four--it provides for a sharper inference regarding timing skill and helps mitigate biases associated with the choice of investment style.

JEL Classifications: G0, G1

Working Paper Series

Date posted: April 23, 1998 ; Last revised: October 11, 2000

Suggested Citation

Ingersoll Jr., Jonathan E., Goetzmann, William N. and Ivkovich, Zoran, Monthly Measurement of Daily Timers (November 14, 1998). Available at SSRN: http://ssrn.com/abstract=79388 or doi:10.2139/ssrn.79388


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Contact Information

William N. Goetzmann (Contact Author)
Yale School of Management - International Center for Finance ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-432-8931 (Fax)
HOME PAGE: http://viking.som.yale.edu
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jonathan E. Ingersoll Jr.
Yale School of Management - International Center for Finance ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5924 (Phone)
203-432-6974 (Fax)
Zoran Ivkovich
Michigan State University, Department of Finance ( email )
315 Eppley Center
East Lansing, MI 48824-1122
United States
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