Does Industry Timing Ability of Hedge Funds Predict Their Future Performance, Survival, and Fund Flows?

63 Pages Posted: 8 Mar 2019 Last revised: 25 Nov 2019

See all articles by Turan G. Bali

Turan G. Bali

Georgetown University - Robert Emmett McDonough School of Business

Stephen J. Brown

New York University - Stern School of Business

Mustafa Onur Caglayan

Florida International University

Umut Celiker

Cleveland State University - Monte Ahuja College of Business

Date Written: November 15, 2019

Abstract

This paper investigates hedge funds’ ability to time industry-specific returns and shows that funds’ timing ability in the manufacturing industry improves their future performance, probability of survival, and ability to attract more capital. The results also indicate that best industry-timing hedge funds in the manufacturing sector have the highest return exposure to earnings surprises. This link, together with persistently sticky earnings surprises and the strong predictive power of business cycle indicators over future earnings surprises in the manufacturing sector, explain to a great extent why it is beneficial for skilled hedge fund managers to time the manufacturing industry-specific returns.

Keywords: hedge funds; timing ability; industry returns

JEL Classification: G10; G11; C13

Suggested Citation

Bali, Turan G. and Brown, Stephen J. and Caglayan, Mustafa Onur and Celiker, Umut, Does Industry Timing Ability of Hedge Funds Predict Their Future Performance, Survival, and Fund Flows? (November 15, 2019). Georgetown McDonough School of Business Research Paper No. 3337216. Available at SSRN: https://ssrn.com/abstract=3337216 or http://dx.doi.org/10.2139/ssrn.3337216

Turan G. Bali (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
(202) 687-5388 (Phone)
(202) 687-4031 (Fax)

HOME PAGE: https://sites.google.com/a/georgetown.edu/turan-bali

Stephen J. Brown

New York University - Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)

Mustafa Onur Caglayan

Florida International University ( email )

College of Business
11200 S.W. 8th St, Ryder Building 223B
Miami, FL 33199
United States
(305) 348-8430 (Phone)

HOME PAGE: http://https://business.fiu.edu/faculty/expert-guides.cfm?FlagDirectory=Display&EMP=caglayanm

Umut Celiker

Cleveland State University - Monte Ahuja College of Business ( email )

1860 E 18th St #420
Cleveland, OH 44114
United States

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