On the Timing Ability of Mutual Fund Managers

Authors

  • Nicolas P. B. Bollen,

  • Jeffrey A. Busse

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    • Bollen is Assistant Professor of Finance at the David Eccles School of Business, University of Utah. Busse is Assistant Professor of Finance at the Goizueta Business School, Emory University. The authors thank René Stultz, an anonymous referee, Uri Loewenstein, Tom Smith, Liz Tashjian, and seminar attendees at the 2000 European Finance Association meetings, University of Utah, and the Australian Graduate School of Management for their useful comments.

Abstract

Existing studies of mutual fund market timing analyze monthly returns and find little evidence of timing ability. We show that daily tests are more powerful and that mutual funds exhibit significant timing ability more often in daily tests than in monthly tests. We construct a set of synthetic fund returns in order to control for spurious results. The daily timing coefficients of the majority of funds are significantly different from their synthetic counterparts. These results suggest that mutual funds may possess more timing ability than previously documented.

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