Journal of Financial Economics Vol. 86 No. 3 2007
Do mutual funds time the market? Evidence from portfolio holdings
Abstract
Previous research finds insignificant market-timing ability for mutual funds using tests based on fund returns. The return-based tests, however, are subject to the “artificial timing” bias. In this paper, we propose and implement new measures of market timing based on mutual fund holdings. Our holdings-based measures do not suffer from the artificial timing bias. We find that, on average, actively managed U.S. domestic equity funds have positive timing ability. Market timing funds use non-public information to predict market returns, tend to have high industry concentration, large fund size, a tilt toward small-cap stocks, and are active in industry rotation.
- DOI
- 10.1016/j.jfineco.2006.09.006
- Volume
- 86
- Issue
- 3
- Pages
- 724-758
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref