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

47 Pages Posted: 18 Jul 2016 Last revised: 27 Jul 2017

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 - Tinbergen Institute Amsterdam (TIA)

Date Written: July 2017

Abstract

This paper studies the level, determinants, and implications of the factor timing ability of hedge fund managers. We find evidence in favor of factor timing ability, although with ample variation in timing skills across investment styles, factors, and time. Our analysis shows that better factor timing skills are related to funds that are younger, smaller, have higher incentive fees, have a smaller restriction period, and make use of leverage. Factor timing is associated with outperformance. Out-of-sample, the top factor timing funds outperform the bottom factor timing funds with a significant 1% per annum. Timing skills, though, do not 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 (July 2017). 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, NL-1081HV
Netherlands
+31 20 59 85220 (Phone)

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

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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