20 Pages Posted: 11 Jun 2012
Date Written: June 11, 2012
In this paper, we globally investigate market timing abilities of mutual fund managers from the three following perspectives: market return, market-wide volatility and market aggregate liquidity. We propose a generalized specification to study market timing. Instead of considering an average market exposure for mutual funds, we allow mutual fund market betas to follow a random walk in the absence of market timing ability. As a consequence, we capture market exposure dynamics which is effectively due to manager market timing skills while allowing exposure dynamics to come from other sources than market timing. We find that on average 6% of mutual funds display return market timing abilities while this percentage amounts to respectively 13% and 14% for volatility and liquidity market timing. We also analyze market timing by investment strategies and for surviving and dead funds. Dead fund exhibit lower volatility and liquidity timing skills than live funds.
Keywords: Mutual fund, Market timing, market return, volatility, liquidity
Suggested Citation: Suggested Citation
Sougné, Danielle Marie and Bodson, Laurent and Cavenaile, Laurent, A Global Approach to Mutual Funds Market Timing Ability (June 11, 2012). Available at SSRN: https://ssrn.com/abstract=2081673 or http://dx.doi.org/10.2139/ssrn.2081673
By Wayne Ferson