Multi-Asset Class Mutual Funds: Can They Time the Market? Evidence from the US, UK and Canada

Abstract

The importance of asset allocation decisions in wealth management is well established. However, given its importance it is perhaps surprising that so little attention has been paid to the question of whether professional fund managers are skillful at timing market movement across asset classes over time. The timing literature has tended to concentrate on the timing skill of single asset class funds. Using data on US, UK and Canadian multi-asset class funds, we apply two alternative methodologies to identify the asset class timing abilities of managers. Overall, whether we apply a returns-based method or a holdings-based testing approach, we find evidence of only a tiny minority of funds with asset class timing ability.

Keywords: Market timing, asset class timing, asset allocation

JEL Classification: G0; G11; G15