Conditional Market Timing with Benchmark Investors
Connie Becker, Wayne Ferson, David Myers, Michael Schill
NBER Working Paper No. 6434
This paper tests models of mutual fund market timing that (1) allow the manager's utility function to depend on returns in excess of a benchmark; (2) distinguish timing based on lagged, publicly available information variables from timing based on finer information; and (3) simultaneously estimate the parameters which describe the public information environment, the risk aversion and the precision of the fund's market timing signal. Using a sample of more than 400 U.S. mutual funds for 1976-94, the estimates imply that mutual funds behave as risk averse, benchmark investors. Conditioning on public information variables improves the model specification, and after controlling for the public information we find no evidence that funds have significant market timing ability.
Document Object Identifier (DOI): 10.3386/w6434
Published: Journal of Financial Economics, Vol. 52, no. 1 (April 1999): 119-148.
Users who downloaded this paper also downloaded* these: