The liquidity timing ability of mutual funds
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Published Version
Date
2024-06-08
Authors
Yin, Zhengnan
O’Sullivan, Niall
Sherman, Meadhbh
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier Inc.
Published Version
Abstract
We apply the nonparametric methodology of Jiang (2003) to test the market liquidity timing skills across individual equity mutual funds in three countries (the US, UK, and China). We calculate the monthly stock market liquidity using simple averages (across stocks) as well as the asymptotic principal component analysis (APCA) method based on six stock liquidity measures. Using an across-measure of market liquidity from APCA, we find a relatively small number of funds demonstrate statistically positive liquidity timing skills at a 5% significance level for the period of 2000–2021. After controlling for lagged market liquidity information, we still find a small number of mutual funds that have conditional liquidity timing ability using the nonparametric method.
Description
Keywords
Mutual fund performance , Liquidity timing , Liquidity , Principal component analysis , Nonparametric test
Citation
Yin, Z., O’Sullivan, N. and Sherman, M (2024) 'The liquidity timing ability of mutual funds', The North American Journal of Economics and Finance, 74, 102201 (22pp). https://doi.org/10.1016/j.najef.2024.102201