Hedge Fund Manager Skill and Style-Shifting

Using a novel style identification procedure, we show that style-shifting is a dynamic strategy commonly used by hedge fund managers. Three quarters of hedge funds shifted their investment styles at least once over the period from January 1994 to December 2013. We perform empirical tests of two hypotheses for the motivations of hedge fund style-shifting, namely backward-looking and forward-looking hypotheses. We find no evidence that style-shifting funds are backward-looking. Instead, we show evidence that managers of style-shifting funds exhibit both style-timing ability and the skill of generating abnormal returns in new styles. The new styles that hedge funds shift to on average outperform their old styles by 0.76% and style-shifting funds on average outperform their new style benchmark by 1.10% over the subsequent 12-month horizon. Finally, we show that small funds, winner funds, and funds with net inflows are more likely to shift styles. This paper was accepted by David Simchi-Levi, finance.

Trading Macro-Cycles of Foreign Exchange Markets Using Hybrid Models

Most existing studies on forecasting exchange rates focus on predicting next-period returns. In contrast, this study takes the novel approach of forecasting and trading the longer-term trends (macro-cycles) of exchange rates. It proposes a unique hybrid forecast model consisting of linear regression, multilayer neural network, and combination models embedded with technical trading rules and economic fundamentals to predict the macro-cycles of the selected currencies and investigate the predicative power and market timing ability of the model. The results confirm that the combination model has a significant predictive power and market timing ability, and outperforms the benchmark models in terms of returns. The finding that the government bond yield differentials and CPI differentials are the important factors in exchange rate forecasts further implies that interest rate parity and PPP have strong influence on foreign exchange market participants.

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

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.

Kinerja Investasi Exchange Trade Fund di Indonesia

The aim of this research is to obtain empirical evidence about the effect of stock selection skills, market timing ability, fund size and fund age on the performance of exchange trade funds. The population in this study are all exchange trade fund investment products listed on the Indonesia Stock Exchange from 2017 to 2019. The sampling technique uses purposive sampling. To test the hypothesis, multiple linear regression analysis was used. This study proves that stock selection skills have a positive effect on the performance of exchange trade funds in Indonesia. Meanwhile, market timing ability, fund size and fund age do not have a positive effect on the performance of exchange trade funds in Indonesia. The reason is that only one investment manager PT. Indo Premier Investment Management which is always active in trading exchange trade funds in Indonesia. This research has implications for the more active investment managers in offering exchange trade fund products to attract investors because they are able to survive in times of crisis. Keywords: Exchange Trade Funds; Investation.

Analysis of the Effect of Asset Allocation on Portfolio Performance with Diversification as an Intervening Variable

This study aims to analyze the effect of asset allocation on portfolio performance with diversification as an intervening variable in the Pension Fund, a non-bank financial institution that manages the pension program and is registered and supervised by the Financial Services Authority (OJK) in the 2016-2019 period. A total of 34 Pension Funds were sampled so that the total sample was 136 in the 2016-2019 period. Data analysis using Structural Equation Modeling (SEM). The results showed that Selection Ability and Fund Size had a significant effect on Diversification, while Timing Ability had a significant effect on Portfolio Performance. Intervening test using Sobel Test shows that Diversification has not been able to mediate Asset Allocation on Portfolio Performance.

An Empirical Investigation of the Performance of Fund Managers in Pakistan

This study aims to determine the stock selection ability and market timing ability of mutual fund managers, focusing on conventional funds and Islamic funds in Pakistan. Although there has been significant growth in the number and assets of mutual funds in recent years, few studies measure the performance of mutual funds managers. The scarcity of existing literature motivates this study. In this study, two models are used to measure the stock selection and market timing on a sample of conventional mutual funds and Islamic mutual funds over 2010 and 2019 using annual returns. Overall, the results indicate that the performance study of conventional mutual funds and Islamic mutual funds indicates that manager performance is not superior in all three portfolios, i.e., conventional funds, Islamic funds, and overall funds in over sample period. This also indicates that both Conventional and Islamic fund managers do not outperform the market (KSE 100 index). Thus, there is a lack of market timing ability. Using Tranoy and mazuy and Jansen models found a lack of stock selection and market timing ability of mutual fund managers in Pakistani mutual funds. In this study, I have applied only two models to examine both the timing and selection ability of conventional and Islamic Pakistani equity funds. For future possibilities, the study suggests adopting several methods and approaches like the TMFF3 model and HM-FF3 model, making the study more comprehensive and accurate than this research.

Evaluation of Explicit Motor Timing Ability in Young Tennis Players

A crucial ability for athletes playing sports that involve coincidence timing actions is the motor timing ability. The efficiency of perceptual and motor processes underlying the motor timing ability has been related to the motor experience gained in interceptive sports, such as tennis. In the present study, the motor timing ability in young tennis players (TP) and age-matched control participants (CTRL) was compared by means of a synchronization paradigm. Participants were asked to perform finger-opposition movements in synch to a metronome beating 0.5 and 2 Hz in (1) a bimanual coordination test, which compared the performance of the dominant hand with that of the contralateral hand, and (2) a movement lateralization test, which compared the motor performance of the dominant hand during single-hand and bimanual tasks (BTs). The motor performance was evaluated through movement strategy [defined by touch duration (TD), inter-tapping interval (ITI), and movement frequency] and movement accuracy (temporal accuracy defined by the synchronization error and spatial accuracy defined by the percentage of correct touches—%CORR_SEQ). Results showed that motor expertise significantly influences movement strategy in the bimanual coordination test; TD of TP was significantly higher than those of CTRL, specifically at 0.5 Hz. Furthermore, overall ITI values of TP were lower than those of CTRL. Lastly, in the movement lateralization test, the %CORR_SEQ executed with the right dominant hand by TP in the BT was significantly higher than those of CTRL. A discussion about the role of motor expertise in the timing ability and the related neurophysiological adaptations is provided.

A Study on the Style Investment of Equity Funds

We classify “fund style” by the fund name and conduct a portfolio-based style analysis. The main results are as follows. First, the proportion of value-style and dividend-style funds is very high compared to other style types in active funds. Second, managers tend not to adhere strictly to the fund style classified by the fund name. Interestingly, the smaller the fund size, the weaker the style characteristics. This result suggests that the management industry neglects small funds and does not fulfill its fiduciary duty. Third, we find that the persistency of the growth style is far behind the value style, and both winner and loser styles have the lowest persistency among all styles. Fourth, timing abilities for market factor, size factor, and value factor are not observed in general, but the timing ability for momentum factor is significantly observed in the active fund group. Fifth, we define artificial fund styles with consistent style investment strategy and compare those with the actual fund styles. We find that the risk of artificial types is generally lower than that of actual types and that several artificial types dominate real types due to higher returns and smaller risks.

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

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.