Security Timing Ability and Fund Manager Performance

Abstract

We propose a new measure of individual security timing ability as distinct from (aggregate) market timing ability. Security timing captures the proportion of potential returns generated by the fund manager over an evaluation period. Using a unique database of daily transactions, we examine the extent to which active fund managers are successful in timing their daily security entry and exit decisions. As hypothesized, we find that fund manager out-performance is significantly related to individual security timing.

Keywords: Security Timing, Daily Trading, Performance Evaluation

JEL Classification: G23