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A Global Approach to Mutual Funds Market Timing Ability
Sougné, Danielle; Bodson, Laurent; Cavenaile, Laurent
2012
 

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Keywords :
market timing; market-wide volatility; aggregate liquidity; kalman Filter; mutual fund; market return
Abstract :
[en] In this paper, we globally investigate market timing abilities of mutual fund managers from the three perspectives: market return, market-wide volatility and aggregate liquidity. We propose a new specification to study market timing. Instead of considering an average market exposure for mutual funds, we allow mutual fund market betas to follow a random walk in the absence of market timing ability. As a consequence, we capture market exposure dynamics which is really due to manager market timing skills while allowing dynamics to come from other sources than market timing. We find that on average 6% of mutual funds display return market timing abilities while this percentage amounts to respectively 13% and 14% for volatility and liquidity market timing. We also analyze market timing by investment strategies and for surviving and dead funds. Dead fund exhibit lower volatility and liquidity timing skills than live funds.
Disciplines :
Finance
Author, co-author :
Sougné, Danielle ;  Université de Liège - ULiège > HEC-Ecole de gestion : UER > Gestion financière et consolidation
Bodson, Laurent ;  Université de Liège - ULiège > HEC-Ecole de gestion : UER > UER Finance et Droit
Cavenaile, Laurent
Language :
English
Title :
A Global Approach to Mutual Funds Market Timing Ability
Publication date :
May 2012
Number of pages :
20
Available on ORBi :
since 18 May 2012

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