Correcting for Heteroscedasticity in Tests for Market Timing Ability

1986 ◽  
Vol 59 (4) ◽  
pp. 585 ◽  
Author(s):  
William Breen ◽  
Ravi Jagannathan ◽  
Aharon R. Ofer
Keyword(s):  
Market Timing ◽  
Timing Ability

A Study on Stock-Selection and Market-Timing Performance: Evidence from Hong Kong Mandatory Provident Funds (MPF)

2008 ◽  
Vol 11 (04) ◽  
pp. 617-649 ◽  
Author(s):  
Patrick Kuok-kun Chu ◽  
Michael McKenzie
Keyword(s):  
Hong Kong ◽  
Economic Condition ◽  
Market Timing ◽  
Stock Selection ◽  
Timing Ability ◽  
Conditional Models ◽  
Equity Funds ◽  
The Individual ◽  
Timing Models ◽  
Comprehensive Study

This paper presents the first comprehensive study of the performance and market timing ability of the equity funds that comprise the Hong Kong Mandatory Provident Funds (MPF) scheme. In general, our results suggest that US equity funds consistently underperform relative to the market, while the other fund groups consistently outperform the market. The stock-selection ability of MPF constituent equity funds in times of changing economic condition is also investigated. The evidence is consistent with previous studies, which suggest that the conditional models decrease the individual fund traditional alpha measure. The market timing models of Treynor–Mazuy and Henriksson–Merton provide evidence of superior market timing ability.

scholarly journals MANAGERIAL ABILITIES AND FACTOR INVESTMENT STYLE PERFORMANCES OF MALAYSIAN MUTUAL FUND MANAGERS

2021 ◽  
Vol 6 (1) ◽  
pp. 118-135
Author(s):  
Pick-Soon Ling ◽  
Ruzita Abdul-Rahim
Keyword(s):  
Mutual Funds ◽  
Portfolio Management ◽  
Mutual Fund ◽  
Market Timing ◽  
Stock Selection ◽  
Investment Style ◽  
Fund Managers ◽  
Equity Mutual Funds ◽  
Timing Ability ◽  
Stock Picking

Background and Purpose: Studies focusing on mutual fund managerial abilities and investment style strategies are still scarce in the literature. Thus, this study aims to provide new evidence and insights into the managerial abilities and investment style performances of Malaysian fund managers.   Methodology: A total of 444 Malaysian equity mutual funds (EMFs) were evaluated using Carhart’s model incorporated with Treynor-Mazuy (T-M) and Henriksson-Merton (H-M) market timing models for the study period, from January 1995 to December 2017.   Findings: Fund managers displayed superior stock selection skills with 32 percent and 43 percent of funds for T-M and H-M respectively, with perverse market timing ability which accounted for 39 percent and 42 percent of funds for T-M and H-M respectively. Perverse timing ability had reduced the superior stock-picking skills of fund managers. This suggests that the EMFs performance could further improve if respective fund managers perform better in market timing ability. The finding also indicates that size effect (SMB) and value effect (HML) play significant roles in investment style strategies, while results of momentum factor (WML) propose that Malaysian fund managers have followed the contrarian strategy.   Contributions: This study contributes in several ways especially in the literature of portfolio management as the evidence is obtained from the largest mutual funds sample size and the longest study period. Moreover, this study also used the highest frequency data to study the effects of market timing which were overlooked in previous studies.   Keywords: Adjusted carhart, Malaysian market, market timing, mutual fund, stock selection.   Cite as: Ling, P-S., & Abdul-Rahim, R. (2021). Managerial abilities and factor investment style performances of Malaysian mutual funds.  Journal of Nusantara Studies, 6(1), 118-135. http://dx.doi.org/10.24200/jonus.vol6iss1pp118-135

scholarly journals Bond–Equity Yield Ratio Market Timing in Emerging Markets

2019 ◽  
Vol 18 (1) ◽  
pp. 52-79
Author(s):  
Nebojsa Dimic ◽  
Vitaly Orlov ◽  
Janne Äijö
Keyword(s):  
Emerging Markets ◽  
Extreme Values ◽  
Emerging Market ◽  
Market Timing ◽  
Yield Ratio ◽  
Moving Averages ◽  
International Evidence ◽  
Timing Ability ◽  
Jel Classifications

This article investigates the market timing ability of the bond–equity yield ratio (BEYR) from an international investor perspective. Consolidating data on emerging markets, we document no major international evidence that BEYR-based investing strategies, namely extreme values, thresholds and moving averages, provide higher risk-adjusted returns than benchmark buy-and-hold portfolios. However, we develop new augmented BEYR indicators by introducing the notion of US bonds as a safe investment relative to emerging market stocks and bonds. Dynamic strategies based on our augmented BEYR indicators produce significant gains in risk-adjusted returns compared with traditional BEYR and buy-and-hold benchmark strategies. JEL Classifications: G11, G12, G15

scholarly journals The Announcement Effect of Open-Market Share Buybacks: The Case for European Firms

2018 ◽  
Vol 10 (8) ◽  
pp. 117
Author(s):  
Jyoti Gupta ◽  
Florian Wagner
Keyword(s):  
Capital Structure ◽  
Abnormal Return ◽  
Market Timing ◽  
Structure Optimization ◽  
Share Price ◽  
Open Market ◽  
Timing Ability ◽  
Announcement Returns ◽  
Positive Abnormal Return ◽  
Book Values

Using a comprehensive sample of 1830 open-market repurchases of 15 European countries encompassing the period from 1998 until 2013, we analyzed the magnitude and determinants of the share price reaction on announcement. Our results indicate that buyback announcements in Europe lead on average to a significantly positive abnormal return of 0.92% on announcement day, however, decreasing in firm size and announcement frequency. Additionally, our findings show that the market does not particularly greet the distribution of excess cash to shareholders, but rather when companies take advantage of undervalued stock as market-to-book values are inversely related to announcement returns. Looking at the companies’ leverage ratios, the motive of capital structure optimization cannot be supported by the empirical findings. Lastly, with respect to managerial market timing ability we could not observe that buybacks are following a period of share price underperformance, concluding that managers are not able to time the implementation of buyback programs.

Performance evaluation of equity unit trusts in South Africa

2017 ◽  
Vol 43 (3) ◽  
pp. 379-402 ◽  
Author(s):  
Bonolo Maggie Thobejane ◽  
Beatrice D. Simo-Kengne ◽  
John W. Muteba Mwamba
Keyword(s):  
South Africa ◽  
Market Timing ◽  
Rank Correlation ◽  
Stock Selection ◽  
Managerial Ability ◽  
Cross Sectional ◽  
Content Type ◽  
Weak Evidence ◽  
Timing Ability ◽  
Portfolio Managers

Purpose The purpose of this paper is to evaluate the performance of 191 equity unit trusts in an emerging market, South Africa over the period from February 2006 to January 2016, which captures different market conditions (pre-global financial crisis, crisis and recovery periods). Besides testing for managerial ability, both cross-sectional regression and the non-parametric rank correlation test are used to test whether the performance generated by unit trusts does persist. Design/methodology/approach To evaluate the managerial ability of portfolio managers, two widely used methods, the Treynor-Mazuy (1966) model and Henriksson-Merton (1981) model, are employed. Both models test whether portfolio managers have stock selection and market timing ability. The cross-sectional regression and the rank correlation test are implemented which account for both parametric and non-parametric approaches of persistence testing, respectively. Findings Weak evidence of stock selection as well as market timing ability was found. Moreover, most of the unit trusts are reported to have insignificant coefficients. When testing for performance persistence using returns, the Sharpe ratio and the Sortino ratio as performance metrics, the overall results also revealed weak evidence of persistence that is equally spread across winning and losing funds. Originality/value While research on unit trusts’ performance has been conducted in emerging economies, little has been done in testing for managerial ability in general and in South Africa in particular. Moreover, the research tends to focus more on one class – Equity General. This paper extends the performance literature by testing whether portfolio managers in the South African equity unit trusts industry have stock selection and market timing ability.

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