Can Mutual Funds Time Investment Styles?
13 Pages Posted: 26 Jul 2007
Date Written: October 2006
We investigate the ability of mutual fund managers to successfully rotate between investment styles based on characteristics such as market capitalization, valuation ratios, and price momentum. We find evidence in favor of market timing among a group of 153 US-based mutual funds with a Morningstar Midcap/Blend investments style. We also find evidence in favor of mutual funds being able to predict the direction of the valuation and momentum style returns, but not their magnitude. Our results indicate that the mutual funds in our sample were not able to rotate successfully between stocks with small and large market capitalization.
Keywords: Mutual funds, performance evaluation, style timing
JEL Classification: G11, G23
Suggested Citation: Suggested Citation