Abstract

http://ssrn.com/abstract=890701
 
 

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Do Mutual Funds Time their Benchmarks?


Steven N. Kaplan


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Berk A. Sensoy


Ohio State University - Fisher College of Business

November 2005


Abstract:     
We investigate whether mutual funds time their self-designated benchmark indexes. Using data on fund portfolio holdings, we consider two possible sources of timing attempts: variation in cash holdings and variation in the benchmark beta of the fund portfolio. The results are mixed. Inconsistent with timing, funds do not successfully time the benchmark by varying their cash holdings. If anything, funds are more likely to increase cash or maintain high levels of cash before positive, not negative, benchmark excess returns. At the same time, consistent with timing ability, changes in the benchmark betas of fund portfolios are positively associated with future benchmark excess returns at horizons of 3, 6, and 12 months. The relation is driven by changes in the benchmark beta of the equity portion of fund portfolios rather than changes in portfolio weights on equity.

Keywords: Mutual Funds, Market Timing, Benchmarks, Cash

working papers series


Not Available For Download

Date posted: March 14, 2006  

Suggested Citation

Kaplan, Steven N. and Sensoy, Berk A., Do Mutual Funds Time their Benchmarks? (November 2005). Available at SSRN: http://ssrn.com/abstract=890701

Contact Information

Steven Neil Kaplan
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Berk A. Sensoy (Contact Author)
Ohio State University - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

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