An Examination of Mutual Fund Timing Ability Using Monthly Holdings Data
42 Pages Posted: 18 Jul 2009
Date Written: July 13, 2009
In this paper we use data on the monthly holdings for a set of mutual funds to study the timing ability of these funds. These data differ from holdings data used in previous studies in that our holdings data have a higher frequency and include a full range of securities (e.g., options, bonds and futures), not just traded equities. By examining monthly holdings we are able to see how management changes the risk parameters and industry holdings in a fund and to examine how this contributes to timing. We find evidence that timing decisions result in a decrease in performance, whether timing is measured using conditional or unconditional sensitivities. Likewise, sector rotation decisions also result in lower returns. Examining the results for individual sectors shows that the majority of the negative impact on returns from sector rotation comes about because of a fund mis-timing its exposure to high-tech stocks.
Keywords: mutual funds, portfolios, composition, timing
JEL Classification: G11, G12
Suggested Citation: Suggested Citation