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Timing Ability in the Focus Market of Hedge Funds

Yong Chen

Texas A&M University - Department of Finance

September 16, 2006

This paper examines the timing ability of hedge funds covering various investment categories. We extend the Treynor-Mazuy (1966) and Henriksson-Merton (1981) market timing models to a multiple market framework and propose the concept of a focus market in which a fund trades most actively. Concentrating on the focus market enables us to parsimoniously apply conditional multifactor models. With a large sample of hedge funds during 1994-2002, we show evidence of significant timing ability in the focus markets including bond, currency, and equity markets at both the category and the fund levels. Tests of performance persistence present some supportive evidence over a short horizon.

Number of Pages in PDF File: 49

Keywords: Hedge funds, market timing, focus market, performance persistence

JEL Classification: G11, G14, G23

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Date posted: March 22, 2005  

Suggested Citation

Chen, Yong, Timing Ability in the Focus Market of Hedge Funds (September 16, 2006). Available at SSRN: https://ssrn.com/abstract=687230 or http://dx.doi.org/10.2139/ssrn.687230

Contact Information

Yong Chen (Contact Author)
Texas A&M University - Department of Finance ( email )
360 Wehner Building
College Station, TX 77843-4218
United States

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