Nonparametric Tests For Market Timing Ability Using Daily Mutual Fund Returns

48 Pages Posted: 18 Mar 2020 Last revised: 29 Sep 2020

See all articles by Jing Ding

Jing Ding

Tsinghua University

Lei Jiang

Tsinghua University

Xiaohui Liu

Jiangxi University of Finance and Economics

Liang Peng

Georgia State University - Risk Management & Insurance Department

Date Written: September 29, 2020

Abstract

When using daily mutual fund returns to study the market timing, heavy tails and heteroscedasticity significantly challenge the existing methods. We to accommodate them, we propose a new measure and an efficient test for market timing ability and find that the traditional test misclassifies about 50% of funds. Excluding funds withvzero timing ability, we find that that higher timing ability is associated with lower stock picking skill, this conclusion is robust to different benchmark models. Examining theholding characteristics of the funds with different levels of timing ability, we find that funds with a positive timing ability hold stocks with lower trading frictions.

Keywords: Coskewness, Market Timing, Mutual Fund

JEL Classification: G11, G23, C58

Suggested Citation

Ding, Jing and Jiang, Lei and Liu, Xiaohui and Peng, Liang, Nonparametric Tests For Market Timing Ability Using Daily Mutual Fund Returns (September 29, 2020). Available at SSRN: https://ssrn.com/abstract=3542845 or http://dx.doi.org/10.2139/ssrn.3542845

Jing Ding

Tsinghua University ( email )

Beijing, 100084
China
(+86)18811327918 (Phone)

Lei Jiang (Contact Author)

Tsinghua University ( email )

Beijing, 100084
China

Xiaohui Liu

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Liang Peng

Georgia State University - Risk Management & Insurance Department

P.O. Box 4036
Atlanta, GA 30302-4036
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
115
Abstract Views
673
rank
303,990
PlumX Metrics