Working Paper: NBER ID: w6434
Authors: Connie Becker; Wayne Ferson; David Myers; Michael Schill
Abstract: 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.
Keywords: No keywords provided
JEL Codes: G11; G12; G14; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| risk aversion of fund managers (G11) | market behavior (D40) |
| public information variables (H49) | model specification (C52) |
| public information (L39) | market timing ability (G14) |