Market-Timing Performance of Mutual Fund Investors in Emerging Markets

28 Pages Posted: 7 May 2019 Last revised: 10 Apr 2020

See all articles by Alberto Cagnazzo

Alberto Cagnazzo

LUISS Guido Carli University, Department of Economics

Date Written: April 10, 2020

Abstract

This paper empirically investigates the performance of market-timing strategies effectively used by investors in Emerging Markets (EMs). We identify short-term determinants of mutual fund flows into EM equity and fixed income, finding a well-established flow-performance relation. Hence, we verify whether investors make good timing decisions with a statistic hereafter referred to as “performance gap”. We find that the average performance gap is negative and statistically significant for all funds. It is equal to -0.05% per month for equity and -0.06% for fixed income. Although gaps remain negative regardless of the strategy declared by the fund manager, corporate and growth funds exhibit the worst performance.

Keywords: Market-timing, Mutual funds, Emerging Markets

JEL Classification: G1, G2, G4

Suggested Citation

Cagnazzo, Alberto, Market-Timing Performance of Mutual Fund Investors in Emerging Markets (April 10, 2020). Available at SSRN: https://ssrn.com/abstract=3364879 or http://dx.doi.org/10.2139/ssrn.3364879

Alberto Cagnazzo (Contact Author)

LUISS Guido Carli University, Department of Economics ( email )

LUISS Guido Carli University, Students
Rome
Italy

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