The market timing ability of UK mutual funds
Blackwell Publishing Ltd.
We apply a recent nonparametric methodology to test the market timing skills of UK equity and balanced mutual funds. The methodology has a number of advantages over the widely used regression based tests of Treynor-Mazuy (1966) and Henriksson-Merton (1981). We find a relatively small number of funds (around 1%) demonstrate positive market timing ability at a 5% significance level while around 19% of funds exhibit negative timing and on average funds miss-time the market. However, controlling for publicly available information we find very little evidence of market timing ability based on private timing signals. In terms of investment styles, there are a small number of successful positive market timers amongst Equity Income and ‘All Company’ funds but not among either Small Stock funds or Balanced funds, although a few small stock funds are found to time a small stock index rather than a broad market index.
Mutual funds performance , Market timing
CUTHBERTSON, K., NITZSCHE, D. & O'SULLIVAN, N. 2010. The Market Timing Ability of UK Mutual Funds. Journal of Business Finance & Accounting, 37, 270-289. doi: 10.1111/j.1468-5957.2009.02157.x
© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Ltd. This is the pre-peer reviewed version of the following article:CUTHBERTSON, K., NITZSCHE, D. & O'SULLIVAN, N. 2010. The Market Timing Ability of UK Mutual Funds. Journal of Business Finance & Accounting, 37, 270-289, which has been published in final form at http://dx.doi.org/10.1111/j.1468-5957.2009.02157.x