TAILIEUCHUNG - An Examination of Mutual Fund Timing Ability Using Monthly Holdings Data

The run on prime MMMFs caused further disruption to already stressed short term corporate credit markets. Though many of the redemptions from prime MMMFs flowed into Treasury and Government MMMFs, and thus MMMF assets in aggregate fell less sharply than those of prime MMMFs, the Treasury and Government funds were not eligible to purchase many of the corporate issues that prime MMMFs were selling or ceasing to roll over. Unprecedented emergency facilities established by the Treasury and Federal Reserve ultimately slowed redemptions from prime MMMFs and helped maintain liquidity in the short term corporate funding markets | Review of Finance Advance Access published March 28 2011 Review Of Finance 2011 0 1-27 doi rof rfr007 An Examination of Mutual Fund Timing Ability Using Monthly Holdings Data EDWIN J. ELTON1 MARTIN J. GRUBER1 and CHRISTOPHER R. BLAKE2 1New York University 2Fordham University Abstract In this paper the authors use monthly holdings to study timing ability. These data differ from holdings data used in previous studies in that the authors data have a higher frequency and include a full range of securities not just traded equities. Using a one-index model the authors find as do two recent studies that management appears to have positive and statistically significant timing ability. When a multiindex model is used the authors show that timing decisions do not result in an increase in performance whether timing is measured using conditional or unconditional sensitivities. The authors show that sector rotation decisions with respect to high-tech stocks are a major contribution to negative timing. JEL Classification G11 G12 1. Introduction While a large body of literature exists on whether active portfolio managers add value the vast majority of this literature has concentrated on stock In its simplest terms this literature examines how much better a manager does compared to holding a passive portfolio of securities with the same risk characteristics sensitivities to one or more indexes . The bulk of the literature on performance measurement ignores whether managers can time the market as a whole or time across subsets of the market such as industries. By doing so that literature assumes that either timing does not exist or if it does exist it will not distort the measurement of an analyst s ability to contribute to performance through stock selection. A number of articles have shown that the existence of timing on the part of management can lead to incorrect inference about the ability of managers to pick stocks whether evaluation is based on either .

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• Eliminate additional
• one decision
• one purchase
• protected against
• automated
• event driven backups
• complete protection
• Confidence always
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