Downside Risk Timing by Mutual Funds

35 Pages Posted: 1 Jun 2015

See all articles by Andriy Bodnaruk

Andriy Bodnaruk

University of Illinois at Chicago

Bekhan Chokaev

Russian Presidential Academy of National Economy and Public Administration (RANEPA); Gaidar Institute for Economic Policy

Andrei Simonov

Michigan State University - Eli Broad Graduate School of Management; Russian Presidential Academy of National Economy and Public Administration (RANEPA); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: May 2015

Abstract

We study whether mutual funds systematically manage downside risk of their portfolios in ways that improve their performance. We find that actively managed mutual funds on average possess positive downside risk timing ability. Funds investing in large-cap and value stocks have stronger downside risk timing skills. Managers adjust fundsÂ’ downside risk exposure in response to macroeconomic information. The economic value of downside risk timing is comparable to that of market timing.

Keywords: downside risk, market timing, mutual funds

JEL Classification: G10, G11

Suggested Citation

Bodnaruk, Andriy and Chokaev, Bekhan and Simonov, Andrei, Downside Risk Timing by Mutual Funds (May 2015). CEPR Discussion Paper No. DP10639. Available at SSRN: https://ssrn.com/abstract=2613036

Andriy Bodnaruk (Contact Author)

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Bekhan Chokaev

Russian Presidential Academy of National Economy and Public Administration (RANEPA) ( email )

Vernadskogo Prospect 82
Moscow, 119571
Russia

Gaidar Institute for Economic Policy

Gazetniy Lane 3-5
Moscow, 125993
Russia

Andrei Simonov

Michigan State University - Eli Broad Graduate School of Management ( email )

645 N. Shaw Lane, 321 Eppley Center
East Lansing, MI 48824-1122
United States

HOME PAGE: http://www.andreisimonov.com

Russian Presidential Academy of National Economy and Public Administration (RANEPA) ( email )

Vernadskogo Prospect 82
Moscow, 119571
Russia

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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