Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/abh/wpaper/17-028.html
   My bibliography  Save this paper

Conditional Market Timing in the Mutual Fund Industry

Author

Listed:
  • Vanessa S. Tchamyou

    (Yaoundé/Cameroon)

  • Simplice A. Asongu

    (Yaoundé, Cameroon)

Abstract
This study complements the scarce literature on conditional market timing in the mutual fund industry by assessing determinants of market timing throughout the distribution of market exposure. It builds on the intuition that the degree of responsiveness by fund managers to investigated factors (aggregate liquidity, information asymmetry, volatility and market excess return) is contingent on their levels of market exposure. To this end, we use a panel of 1467 active open-end mutual funds for the period 2004-2013. Fund-specific time-dynamic beta is employed and we avail room for more policy implications by disaggregating the dataset into market fundamentals of: equity, fixed income, allocation and tax preferred. The empirical evidence is based on Quantile regressions. The following findings are established. First, there is consistent positive threshold evidence of volatility and market return in market timing, with the slim exception of allocation funds for which the pattern of volatility is either U- or S-shaped. Second, the effect of volatility and market return are consistently positive and negative respectively in the bottom and top quintiles of market exposure, but for allocation funds. Third, the effects of information asymmetry and aggregate liquidity are positive and negative, contingent on specifications, level of market exposure and market fundamentals. The findings broadly suggest that blanket responses of market exposures to investigated factors are unlikely to represent feasible strategies for fund managers unless they are contingent on initial levels of market exposure and tailored differently across ‘highly exposed’-fund managers and ‘lowly exposed’-fund managers. Implications for investors and fund managers are discussed.

Suggested Citation

  • Vanessa S. Tchamyou & Simplice A. Asongu, 2017. "Conditional Market Timing in the Mutual Fund Industry," Research Africa Network Working Papers 17/028, Research Africa Network (RAN).
    • Handle: RePEc:abh:wpaper:17/028
    as

    Download full text from publisher

    File URL: http://publications.resanet.org/RePEc/abh/abh-wpaper/Conditional-Market-Timing-in-the-Mutual-Fund-Industry.pdf
    File Function: Revised version, 2017
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kathryn A. Holmes & Robert W. Faff, 2004. "Stability, Asymmetry and Seasonality of Fund Performance: An Analysis of Australian Multi‐sector Managed Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(3‐4), pages 539-578, April.
    2. Asongu, Simplice & Nwachukwu, Jacinta & Tchamyou, Vanessa, 2015. "Information Asymmetry and Financial Development Dynamics in Africa," MPRA Paper 68315, University Library of Munich, Germany.
    3. Edwin J. Elton & Martin J. Gruber & Christopher R. Blake, 2011. "An Examination of Mutual Fund Timing Ability Using Monthly Holdings Data," Review of Finance, European Finance Association, vol. 16(3), pages 619-645.
    4. Vanessa S. Tchamyou & Simplice A. Asongu, 2017. "Information Sharing and Financial Sector Development in Africa," Journal of African Business, Taylor & Francis Journals, vol. 18(1), pages 24-49, January.
    5. Kitagawa, Norio & Okuda, Shin’ya, 2016. "Management Forecasts, Idiosyncratic Risk, and the Information Environment," The International Journal of Accounting, Elsevier, vol. 51(4), pages 487-503.
    6. Tae-Hwy Lee & Yong Bao & Burak Saltoglu, 2006. "Evaluating predictive performance of value-at-risk models in emerging markets: a reality check," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 25(2), pages 101-128.
    7. Thierry Kangoye, 2013. "Does aid unpredictability weaken governance? Evidence from developing countries," Post-Print halshs-00843755, HAL.
    8. Cao, Charles & Simin, Timothy T. & Wang, Ying, 2013. "Do mutual fund managers time market liquidity?," Journal of Financial Markets, Elsevier, vol. 16(2), pages 279-307.
    9. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    10. Simplice Asongu & Joseph Amankwah-Amoah, 2016. "Military expenditure, terrorism and capital flight: Insights from Africa," Working Papers of the African Governance and Development Institute. 16/018, African Governance and Development Institute..
    11. Efobi, Uchenna & Asongu, Simplice, 2016. "Terrorism and capital flight from Africa," International Economics, Elsevier, vol. 148(C), pages 81-94.
    12. Simplice A. Asongu & John C. Anyanwu & Vanessa S. Tchamyou, 2019. "Technology-driven information sharing and conditional financial development in Africa," Information Technology for Development, Taylor & Francis Journals, vol. 25(4), pages 630-659, October.
    13. Ivashina, Victoria, 2009. "Asymmetric information effects on loan spreads," Journal of Financial Economics, Elsevier, vol. 92(2), pages 300-319, May.
    14. Thierry Kangoye, 2013. "Does aid unpredictability weaken governance? Evidence from developing countries," The Developing Economies, Institute of Developing Economies, vol. 51(2), pages 121-144, June.
    15. Asongu, Simplice & Anyanwu, John & Tchamyou, Vanessa, 2016. "Information sharing and conditional financial development in Africa," MPRA Paper 74653, University Library of Munich, Germany.
    16. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
    17. Kon, Stanley J, 1983. "The Market-Timing Performance of Mutual Fund Managers," The Journal of Business, University of Chicago Press, vol. 56(3), pages 323-347, July.
    18. Kathryn A. Holmes & Robert W. Faff, 2004. "Stability, Asymmetry and Seasonality of Fund Performance: An Analysis of Australian Multi‐sector Managed Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(3‐4), pages 539-578, April.
    19. Bodson, Laurent & Cavenaile, Laurent & Sougné, Danielle, 2013. "A global approach to mutual funds market timing ability," Journal of Empirical Finance, Elsevier, vol. 20(C), pages 96-101.
    20. Chih-Chiang Wu, 2011. "Measuring mutual fund asymmetric performance in changing market conditions: evidence from a Bayesian threshold model," Applied Financial Economics, Taylor & Francis Journals, vol. 21(16), pages 1185-1204.
    21. Pastor, Lubos & Stambaugh, Robert F., 2003. "Liquidity Risk and Expected Stock Returns," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 642-685, June.
    22. Nicolas P. B. Bollen & Jeffrey A. Busse, 2001. "On the Timing Ability of Mutual Fund Managers," Journal of Finance, American Finance Association, vol. 56(3), pages 1075-1094, June.
    23. Dierkens, Nathalie, 1991. "Information Asymmetry and Equity Issues," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(2), pages 181-199, June.
    24. Lee, Cheng Few & Rahman, Shafiqur, 1990. "Market Timing, Selectivity, and Mutual Fund Performance: An Empirical Investigation," The Journal of Business, University of Chicago Press, vol. 63(2), pages 261-278, April.
    25. Jiang, George J. & Yao, Tong & Yu, Tong, 2007. "Do mutual funds time the market? Evidence from portfolio holdings," Journal of Financial Economics, Elsevier, vol. 86(3), pages 724-758, December.
    26. Simplice Asongu, 2014. "Financial development dynamic thresholds of financial globalization," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 41(2), pages 166-195, March.
    27. Mansor, F. & Bhatti, M.I. & Ariff, M., 2015. "New evidence on the impact of fees on mutual fund performance of two types of funds," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 35(C), pages 102-115.
    28. Thierry Kangoye, 2013. "Does aid unpredictability weaken governance? Evidence from developing countries," Post-Print halshs-00843756, HAL.
    29. Gilbert W. Bassett Jr. & Hsiu-Lang Chen, 2001. "Portfolio style: Return-based attribution using quantile regression," Empirical Economics, Springer, vol. 26(1), pages 293-305.
    30. Ferson, Wayne E & Schadt, Rudi W, 1996. "Measuring Fund Strategy and Performance in Changing Economic Conditions," Journal of Finance, American Finance Association, vol. 51(2), pages 425-461, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Venessa S. Tchamyou & Simplice A. Asongu & Jacinta C. Nwachukwu, 2018. "Effects of asymmetric information on market timing in the mutual fund industry," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 14(5), pages 542-557, May.
    2. Mahfooz Alam & Valeed Ahmad Ansari, 2020. "Mutual fund managers’ market timing abilities: Indian evidence," Journal of Asset Management, Palgrave Macmillan, vol. 21(4), pages 342-354, July.
    3. Mahfooz Alam & Valeed Ahmad Ansari, 0. "Mutual fund managers’ market timing abilities: Indian evidence," Journal of Asset Management, Palgrave Macmillan, vol. 0, pages 1-13.
    4. Yi, Li & Liu, Zilan & He, Lei & Qin, Zilong & Gan, Shunli, 2018. "Do Chinese mutual funds time the market?," Pacific-Basin Finance Journal, Elsevier, vol. 47(C), pages 1-19.
    5. Wattanatorn, Woraphon & Padungsaksawasdi, Chaiyuth & Chunhachinda, Pornchai & Nathaphan, Sarayut, 2020. "Mutual fund liquidity timing ability in the higher moment framework," Research in International Business and Finance, Elsevier, vol. 51(C).
    6. Simplice A. Asongu & Nicholas M. Odhiambo, 2019. "Governance, capital flight and industrialisation in Africa," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-22, December.
    7. Simplice A. Asongu & Joseph Nnanna, 2020. "Governance and the Capital Flight Trap in Africa," Working Papers of the African Governance and Development Institute. 20/024, African Governance and Development Institute..
    8. Asongu, Simplice A., 2017. "The effect of reducing information asymmetry on loan price and quantity in the African banking industry," Research in International Business and Finance, Elsevier, vol. 41(C), pages 185-197.
    9. Simplice A. Asongu & John C. Anyanwu & Vanessa S. Tchamyou, 2019. "Technology-driven information sharing and conditional financial development in Africa," Information Technology for Development, Taylor & Francis Journals, vol. 25(4), pages 630-659, October.
    10. Asongu, Simplice A. & Nwachukwu, Jacinta C., 2017. "The synergy of financial sector development and information sharing in financial access: Propositions and empirical evidence," Research in International Business and Finance, Elsevier, vol. 40(C), pages 242-258.
    11. Simplice A. Asongu & Rexon T. Nting & Joseph Nnanna, 2020. "Linkages between Globalisation, Carbon Dioxide Emissions and Governance in Sub-Saharan Africa," International Journal of Public Administration, Taylor & Francis Journals, vol. 43(11), pages 949-963, August.
    12. Simplice A. Asongu & Nicholas M. Odhiambo, 2018. "Information asymmetry, financialization, and financial access," International Finance, Wiley Blackwell, vol. 21(3), pages 297-315, December.
    13. Simplice Asongu & Vanessa Tchamyou & Ndemaze Asongu & Nina Tchamyou, 2019. "Fighting terrorism in Africa: evidence from bundling and unbundling institutions," Empirical Economics, Springer, vol. 56(3), pages 883-933, March.
    14. Simplice A. Asongu & Jacinta C. Nwachukwu, 2017. "At what levels of financial development does information sharing matter?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-30, December.
    15. Akshatha Suvarna, 2022. "Timing and Selectivity Performance of Mutual Fund Managers: Application of Conditional Models to Indian Equity Diversified Mutual funds," Jindal Journal of Business Research, , vol. 11(1), pages 81-98, June.
    16. Simplice A. Asongu & Nicholas M. Odhiambo, 2020. "The Mobile Phone, Information Sharing, and Financial Sector Development in Africa: a Quantile Regression Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(3), pages 1234-1269, September.
    17. Asongu, Simplice A. & Koomson, Isaac & Tchamyou, Vanessa S., 2017. "Financial globalisation uncertainty/instability is good for financial development," Research in International Business and Finance, Elsevier, vol. 41(C), pages 280-291.
    18. Simplice A. Asongu & Jacinta C. Nwachukwu, 2017. "Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance," Journal of Industry, Competition and Trade, Springer, vol. 17(3), pages 305-323, September.
    19. Ferson, Wayne & Mo, Haitao, 2016. "Performance measurement with selectivity, market and volatility timing," Journal of Financial Economics, Elsevier, vol. 121(1), pages 93-110.
    20. Liao, Li & Zhang, Xueyong & Zhang, Yeqing, 2017. "Mutual fund managers' timing abilities," Pacific-Basin Finance Journal, Elsevier, vol. 44(C), pages 80-96.

    More about this item

    Keywords

    Mutual funds; Market timing; Thresholds; Quantile regression;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:abh:wpaper:17/028. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anutechia Asongu Simplice (email available below). General contact details of provider: http://www.resanet.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.