Do Mutual Funds Time the Market? Evidence from Portfolio Holdings

36 Pages Posted: 16 Jan 2005 Last revised: 20 Feb 2013

See all articles by George J. Jiang

George J. Jiang

Washington State University

Tong Yao

University of Iowa - Henry B. Tippie College of Business

Tong Yu

University of Cincinnati - Department of Finance - Real Estate

Date Written: October 1, 2006

Abstract

Previous research finds insignificant market-timing ability for mutual funds using tests based on fund returns. The return-based tests, however, are subject to the ‘‘artificial timing’’ bias. In this paper, we propose and implement new measures of market timing based on mutual fund holdings. Our holdings-based measures do not suffer from the artificial timing bias. We find that, on average, actively managed U.S. domestic equity funds have positive timing ability. Market timing funds use non-public information to predict market returns, tend to have high industry concentration, large fund size, a tilt toward small-cap stocks, and are active in industry rotation.

Keywords: market timing, mutual fund

JEL Classification: G10

Suggested Citation

Jiang, George and Yao, Tong and Yu, Tong, Do Mutual Funds Time the Market? Evidence from Portfolio Holdings (October 1, 2006). AFA 2005 Philadelphia Meetings Paper; Journal of Financial Economics (JFE), Vol. 86, 2007. Available at SSRN: https://ssrn.com/abstract=649401 or http://dx.doi.org/10.2139/ssrn.649401

George Jiang

Washington State University ( email )

Department of Finance and Management Science
Carson College of Business
Pullman, WA 99-4746164
United States
509-3354474 (Phone)

HOME PAGE: http://directory.business.wsu.edu/bio.html?username=george.jiang

Tong Yao (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

Tong Yu

University of Cincinnati - Department of Finance - Real Estate ( email )

College of Business Administration
Cincinnati, OH 45221
United States
4019548606 (Phone)
4019548606 (Fax)

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