Timing is Money: The Factor Timing Ability of Hedge Fund Managers

40 Pages Posted: 18 Jul 2016 Last revised: 12 Feb 2020

See all articles by Bart Osinga

Bart Osinga

KAS Bank N.V.

Marc Schauten

Vrije Universiteit Amsterdam

Remco C. J. Zwinkels

Vrije Universiteit Amsterdam; Tinbergen Institute

Date Written: February 1, 2020

Abstract

This paper studies the level, determinants, and implications of the factor timing ability of hedge fund managers. We find that approximately 30% of hedge funds display factor timing ability on at least one factor, concentrated especially at the market, size, and bond factors. Better factor timing skills are related to funds that are more experienced and more flexible. Factor timing is associated with outperformance. Out-of-sample, the top factor timing funds outperform the bottom factor timing funds with a significant 4.32% per annum. Timing skills, though, do not directly lead to higher net flow.

Keywords: Hedge funds, market timing, factor investing, factor timing

JEL Classification: G23, G11

Suggested Citation

Osinga, Albert Jakob and Schauten, Marc and Zwinkels, Remco C.J., Timing is Money: The Factor Timing Ability of Hedge Fund Managers (February 1, 2020). Available at SSRN: https://ssrn.com/abstract=2811163 or http://dx.doi.org/10.2139/ssrn.2811163

Albert Jakob Osinga

KAS Bank N.V. ( email )

Nieuwezijds Voorburgwal 225
Amsterdam, 1012 RL
Netherlands
+31205572841 (Phone)

Marc Schauten

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Remco C.J. Zwinkels (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, NH 1081 HV
Netherlands
+31205985220 (Phone)

HOME PAGE: http://https://research.vu.nl/en/persons/remco-zwinkels

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

HOME PAGE: http://https://tinbergen.nl/person/1574/remco-zwinkels

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