Impact of economic and market factors on the market liquidity timing ability of mutual fund managers in Turkey

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hale Yalcin ◽  
Sema Dube
Keyword(s):  
Structural Breaks ◽  
Market Timing ◽  
Market Liquidity ◽  
Sample Period ◽  
Content Type ◽  
Fund Managers ◽  
Interaction Terms ◽  
Data Analyses ◽  
Timing Ability ◽  
Market Factors

PurposeThe authors examine whether Turkish fund managers employ liquidity timing along with market return timing, and if additional economic and market factors could affect their timing abilities, to help explain the contradictory results in literature vis-a-vis market timing ability.Design/methodology/approachThe authors apply panel data analyses, with interaction terms and incorporating structural breaks, to monthly data for 96 out of 131 Turkish variable mutual funds which have available data for the sample period of 2011–2018. The authors employ the Amihud (2002) illiquidity measure to study market liquidity timing ability along with how additional economic and market factors affect this ability.FindingsThe authors find liquidity timing to be the performance enhancing method employed by Turkish variable fund managers in conjunction with market timing and that evidence for market timing may depend on whether structural breaks, that may be present in returns, are incorporated in the analysis. The authors also find that economic, technology and market-related factors affect timing abilities of fund managers.Research limitations/implicationsConclusions are for Turkey, for the sample period studied, and for the control factors selected based on literature.Practical implicationsIt is important to understand the role of market liquidity in making investment decisions and the paper contributes toward an understanding of how managers design their timing strategies in order to enhance portfolio performance, as well as the impact of additional factors on their ability to time market returns and liquidity. This is also important for evaluating fund managers' performance in terms of contribution to portfolio value.Originality/valueTo the authors knowledge this is the first study on Turkish markets to employ liquidity timing in the context of panel data analyses using interaction terms, as well as structural breaks, to distinguish the extent of liquidity timing from return timing, while incorporating the effect of additional factors on timing ability.

Do mutual fund managers' possess style liquidity timing abilities?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahfooz Alam ◽  
Valeed Ahmad Ansari
Keyword(s):  
Mutual Fund ◽  
Factor Model ◽  
Market Timing ◽  
Market Liquidity ◽  
Content Type ◽  
Fund Managers ◽  
Indian Context ◽  
Equity Mutual Funds ◽  
Equity Funds ◽  
Style Timing

PurposeThis paper investigates the style timing and liquidity style timing vis-à-vis the market, size, value and momentum factors of the actively managed Indian equity mutual funds.Design/methodology/approachWe examine the style timing of the funds using the augmented Carhart four-factor model by incorporating timing measures (Treynor and Mazuy; Henriksson and Merton). Based on this, the study explores the four-factor liquidity and volatility style timing exhibited by fund managers. The sample is from April 2000 to March 2018 and spans the volatile 2008 subprime economic crises. The sample comprised 182 actively managed equity funds from various sizes and was considered to be a well-diversified sample.FindingsThe results of our study provide strong evidence of market liquidity timing in India. No other style timing skills are observed in our analysis. Our results also imply that the fund managers might misidentify size timing as market timing if integrated liquidity timing measures are not employed, leading to false conclusions.Research limitations/implicationsThe findings of our study imply that the fund managers might misidentify size timing as market timing if integrated liquidity timing measures are not employed, leading to false conclusions.Originality/valueThis study, to our knowledge, is the first attempt to investigate the portfolio-based style timing in the Indian context.

Emerging market mutual fund performance: evidence for China

2017 ◽  
Vol 11 (2) ◽  
pp. 167-187 ◽  
Author(s):  
Zia-ur-Rehman Rao ◽  
Muhammad Zubair Tauni ◽  
Amjad Iqbal ◽  
Muhammad Umar
Keyword(s):  
Asset Management ◽  
Mutual Fund ◽  
Factor Model ◽  
Emerging Market ◽  
Market Timing ◽  
Content Type ◽  
Fund Managers ◽  
Developed Markets ◽  
Timing Ability ◽  
Equity Funds

Purpose The purpose of this paper is to find whether Chinese equity funds outperform the market and do Chinese fund managers possess positive market timing ability. This study also aims to investigate whether well-performing (worst) funds of last year continue to perform well (worst) in the following year. Design/methodology/approach Capital Asset Pricing Model and Carhart four-factor model are used for performance analysis, whereas for analyzing market timing ability, the Treynor and Mazuy (1966) and Henriksson and Merton (1981) models are applied. To investigate persistence in the performance of Chinese equity funds, all equity funds are divided, on the basis of performance in the past 12 months, into three equally weighted groups (high, middle and low) and then observed for next 12 months. After that, groups are again rebalanced according to their performance. This study uses a panel regression model for analysis. Findings Chinese equity funds are successful in providing higher than market returns, and fund managers possess positive market timing ability. The authors find that Chinese equity funds do not show persistence in performance as witnessed in developed markets. Well-performing funds (worst funds) of last year do not continue to provide higher (lower) return in the following year. Moreover, the authors detect positive relationship of fund size, age and expense ratio with the fund’s performance. Overall results suggest that emerging market equity funds show better performance than that of developed markets. Practical implications Investors are better off if they invest in equity funds instead of index funds, as results illustrate that equity funds outperformed the market. Further, the strategy of buying well-performing funds of last year and selling poorly performing funds of last year does not look very attractive in China. This study helps investors to understand the Chinese managed funds industry, and such an understanding is also helpful for fund managers and asset management companies who use performance information in marketing strategies. Originality/value This is the first study to investigate the performance persistence in Chinese equity funds and also contributes to the literature about the performance and market timing ability of equity funds. The study takes the sample of 520 equity funds for the period from 2004 to 2014, which includes a period of financial crisis of 2008.

Market timing and selectivity performance of socially responsible funds

2015 ◽  
Vol 11 (2) ◽  
pp. 258-269 ◽  
Author(s):  
Praveen K. Das ◽  
S. P. Uma Rao
Keyword(s):  
Market Timing ◽  
Stock Selection ◽  
Socially Responsible ◽  
Content Type ◽  
Fund Managers ◽  
High Profile ◽  
Long Term Study ◽  
Timing Ability ◽  
Security Selection ◽  
Almost All

Purpose – The purpose of this paper is to examine the market timing and stock selection abilities of socially responsible (SR) mutual funds. Some high-profile SR fund managers try to embrace market timing and security selection plans to add value to the performance. Market timing relies on forecasting the equity market and shifting assets into or out of the market in anticipation of market movements. The selectivity measure assesses fund managers ability to select undervalued securities. Furthermore, the authors examine whether fund characteristics play any role in market timing and security selection ability. Design/methodology/approach – The authors use Treynor and Mazuy's’ (1966) and Henriksson and Mertons’ (1981) model to examine the market timing and security selection ability. The study uses a decade of monthly returns to examine the skills of fund managers in the SR industry for the period from July 2002 to June 2012. Findings – The main findings are that the managers – though not very successful – do indulge in stock selection and market timing activities. It was found that 48 funds have positive statistically significant stock selectivity coefficients and only a very small number of five funds with positive statistically significant market timing coefficients. Results suggest that there is a trade-off between the two activities. It was found that aggressive funds, funds with higher growth rate and riskier funds are more likely to engage in market timing rather than stock selection. Practical implications – The implication is that SR managers cannot achieve superior stock selection and market timing ability simultaneously. Risk-averting investors in SR funds expect SR behavior from the managers. This means that managers of SR funds, with very little evidence of market timing ability, may have to refrain from market timing of SR funds. Originality/value – Using a Morningstar dataset comprising almost all SR funds in existence as of June 2012, this is probably the most exhaustive long-term study to date on market timing and stock selection abilities of SR fund managers.

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

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.

Assessing foreign funds geographical focus timing skill

2016 ◽  
Vol 33 (2) ◽  
pp. 209-221
Author(s):  
Javier Rodríguez ◽  
Herminio Romero
Keyword(s):  
Financial Crisis ◽  
Mutual Funds ◽  
Hedge Funds ◽  
Design Methodology ◽  
Global Financial Crisis ◽  
Market Timing ◽  
Content Type ◽  
Fund Managers ◽  
The Usa ◽  
Timing Models

Purpose This paper aims to study the market timing skill of USA-based foreign open-end mutual funds in their geographical focus market. Design/methodology/approach The authors use daily fund data and two multi-factor extensions of the Treynor-Mazuy (1966) and Henriksson-Merton (1981) timing models to measure US-based foreign funds’ market timing skill during 1999 to 2010. In particular, the authors study fund managers’ skill to time their geographical focus market. Findings The authors report that, in general, foreign funds do not accurately time their geographical focus market. However, during January 2008 to December 2010, the sub period that includes the 2008 global financial crisis, most foreign funds in this sample not only focused on their domestic market, the USA, but also demonstrated statistically significant, good timing skill. Originality/value Although US-based foreign funds’ market-timing skill is not an unexplored topic, this study is the first to consider these funds’ skill to time their geographical focus market, a skill that has been studied in the context of hedge funds.

scholarly journals SELECTIVITY AND MARKET TIMING ABILITY OF MUTUAL FUND HOUSES IN EMERGING COUNTRIES

2021 ◽  
Vol 16 (Number 1) ◽  
pp. 21-42
Author(s):  
Anas Ahmad Bani Atta ◽  
Ainulashikin Marzuki
Keyword(s):  
Mutual Fund ◽  
Market Research ◽  
Market Timing ◽  
Emerging Countries ◽  
Investment Opportunity ◽  
Fund Managers ◽  
Management Processes ◽  
Timing Ability ◽  
Different Types ◽  
The Common

The paper investigates the selectivity and market timing ability of fund houses in emerging countries. The study uses comprehensive performance models on fund houses from four emerging countries. Data span is from 2007 to 2018. Findings indicate that fund managers benefit from the common facilities provided by the fund houses like market research, diversification and investment opportunity. Fund houses showed good selectivity skills but poor market timing ability. The possible reason is that fund houses manage large and different types of funds. This resulted in more complex management processes and thus reduced the ability to track the fluctuations in the market. The findings are important for investors as they are able to allocate their resources more effectively to funds that are best managed by fund houses while for managers, they are able to position themselves relative to their competing peers.

scholarly journals Mutual Fund Performance: Evidence from India

2019 ◽  
Vol 8 (4) ◽  
pp. 11714-11723
Keyword(s):  
Portfolio Management ◽  
Mutual Fund ◽  
Market Timing ◽  
Investment Strategy ◽  
Fund Performance ◽  
Mutual Fund Performance ◽  
Stock Selection ◽  
Multifactor Models ◽  
Fund Managers ◽  
Timing Ability

We empirically examine fund managers’ stock selection and market timing ability using various risk-adjusted measures such as CAPM and multifactor models of FamaFrench (1993) and Carhart (1997) to gauge mutual fund performance in India. The sample consists of 183 actively managed equity-oriented funds and covers the period from April 2000 to March 2018. The study, on the whole, documents some evidence of positive and significant stock selection ability but fails to yield any notable evidence of market timing ability of fund managers. Our results are robust according to various riskadjusted performance evaluation techniques, sub-period analysis, excluding the crisis period and at the individual fund level. The findings of our study are in line with the previous studies that report limited selectivity skill and market timing ability among fund managers. The main implication of the study is that active portfolio management may not be very rewarding in comparison to a passive investment strategy.

The short-run dynamics of Australian real estate investment trusts and direct real estate at the subsector level

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
James Giannarelli ◽  
Piyush Tiwari
Keyword(s):  
Decision Making ◽  
Real Estate ◽  
Practical Significance ◽  
Market Forces ◽  
Real Estate Investment ◽  
Content Type ◽  
Commercial Property ◽  
Fund Managers ◽  
Short Run ◽  
Market Factors

PurposeThis paper examines the extent of the short-run relationship between Australian real estate investment trusts (A-REITs) and direct real estate returns on both a commercial property sector and a prime and secondary grade basis, i.e. a subsector basis.Design/methodology/approachTwo-step methodology is used. First, we identify the dynamic interdependencies between A-REITs and each commercial property subsector to determine whether the returns of A-REITs lead each subsector or vice versa. Second, short-run deviations between these asset returns are estimated by measuring their individual response behaviours to changes in key economic and financial market factors that are expected to influence these returns.FindingsResults suggest that each subsector shares a unique relationship to A-REITs, given each prime and secondary grade commercial property return series varies in behaviour. Some property subsector returns can be predicted by movements in A-REIT returns, whereas returns for others move independent to changes in A-REITs. Similarly, some subsectors commove with A-REITs in response to changes in certain market factors, whereas others diverge. As such, these findings have practical significance to fund managers and portfolio selection, as each commercial subsector embodies its own exposure to A-REITs and vulnerabilities to market forces. Subsectors that commove with A-REITs in response to certain market forces may be used as substitutes in a portfolio. Alternatively, subsectors that diverge from A-REITs in response to market forces may offer diversification benefits when combined.Practical implicationsThese findings extend beyond existing research to offer critical decision-making guidance at the acquisition level, as fund managers may more closely consider the impact that prime or secondary grade properties within a given commercial sector may have on a portfolio that consists of public and private Australian real estate. Ultimately, a more informed acquisition may be carried out as consideration of a property's asset grade allows for a deeper insight into the property's risk profile and its anticipated short-run impact on a portfolio.Originality/valueThis paper extends previous studies that focus mostly on aggregate or sector-level returns by measuring REIT and real estate dynamics at the subsector level, allowing for practical significance at not only the portfolio level but crucially at the acquisition level, a pivotal decision-making stage for fund managers. This is also the first paper to study REIT and real estate causality and response patterns to changes in market factors at the Australian sector level.

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