Do mutual fund managers time market liquidity?

Cao, Charles; Simin, Timothy T.; Wang, Ying

doi:10.1016/j.finmar.2012.10.004

Cited by 68 publications

(38 citation statements)

References 22 publications

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“…Although the prevalence of market liquidity timing is slightly lower at 5.5% of funds, there is nevertheless evidence of skill here also in the extreme tail of the cross‐sectional distribution of funds with many funds exhibiting p values far less than 0.05. These findings in relation to the UK mutual fund industry are consistent with those of the Busse () and Cao et al () US studies. The evidence of market return timing ability is considerably weaker where only 0.6% of funds demonstrate skill.…”

Section: Resultssupporting

confidence: 90%

“…Similarly, in line with Acharya and Pedersen () and Cao et al (), we hypothesise that as market illiquidity shocks are inversely related to contemporaneous market returns, fund managers with liquidity timing ability would decrease market exposure prior to greater market illiquidity. Our market liquidity variable is signed to represent illiquidity (a rising value means the market is becoming more illiquid, see below).…”

Section: Methodssupporting

confidence: 83%

“…Hence, a market illiquidity shock is associated with low contemporaneous returns. Following Acharya and Pedersen (), Cao et al () contends that as market illiquidity shocks are contemporaneously and inversely related to market returns, fund managers with (il)liquidity timing ability reduce market exposure prior to higher market illiquidity and we expect a negative market beta/market illiquidity relation.…”

Section: Introductionmentioning

confidence: 71%

“…There is a sizeable extant literature on funds' ability to time fluctuations in market return, in particular, in the US and UK fund industries, for example, Treynor and Mazuy (), Henriksson (), Ferson and Schadt (), Jiang (), and Cuthbertson, Nitzsche, and O'Sullivan (). However, less work has been undertaken on market volatility timing, for example, Busse () and Giambona and Golec (), while there has been a dearth of study on market liquidity timing (Cao, Simin, & Wang, ). To our knowledge, we are the first paper to set about the dual task of evaluating funds' skill in both market volatility and market liquidity timing in the UK mutual fund industry.…”

Section: Introductionmentioning

confidence: 99%

“…Cao et al (), a study of the US domestic equity mutual fund industry, is the only study of mutual fund liquidity timing. There are also a number of reasons to study market liquidity timing.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Mutual fund skill in timing market volatility and liquidity

Foran

O’Sullivan

2017

Int. J Fin Econ

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We investigate both market volatility timing and market liquidity timing for the first time among UK mutual funds. We find strong evidence that a small percentage of funds time market volatility successfully, that is, when conditional market volatility is higher than normal, systematic risk levels are lower.The evidence around market liquidity timing ability is similar although it is slightly less prevalent compared to volatility timing. Here, funds lower the fund market beta in anticipation of reduced market liquidity. We also find a positive relation between liquidity timing ability and fund abnormal performance where skilled liquidity timers outperform unskilled timers by around 3% p.a.-though this finding is driven by poor liquidity timing funds going on to yield negative alpha. However, despite the evidence of volatility and liquidity timing ability among funds, we fail to find in support of persistence in this timing. We find little evidence supporting market return timing ability.

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Section: Resultssupporting

confidence: 90%

Section: Methodssupporting

confidence: 83%

Section: Introductionmentioning

confidence: 71%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Mutual fund skill in timing market volatility and liquidity

Foran

O’Sullivan

2017

Int. J Fin Econ

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Persistence of multidimensional time‐varying skills of fund managers: A comparison of conventional and Islamic equity funds

Nabi,

ur Rehman,

Ali

et al. 2023

Manage Decis Econ

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This comparative study investigates the time‐varying skills of Shariah‐Compliant and conventional equity fund managers in selectivity, volatility, market return, liquidity, and higher‐order of Multidimensional Time‐Varying Skills of Fund Managers: A Comparison of Conventional and Islamic Equity Fundsco‐moments. Additionally, it examines the persistence and causal relationships among these timing abilities. The analysis utilizes equity mutual funds data from January 2010 to June 2022, encompassing three major Islamic countries: Saudi Arabia, Malaysia, and Pakistan, representing over 80% of the Islamic funds market. Employing diverse time‐varying techniques, this study reveals the presence of selectivity, volatility, and co‐skewness timing skills while detecting the absence of a market, liquidity, and co‐kurtosis timing abilities among conventional and Islamic fund managers.

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Research on Liquidity Preferences of Mutual Fund

Chen

2018

Recent Developments in Data Science and Business Analytics

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Do mutual fund managers time market liquidity?

Cited by 68 publications

References 22 publications

Mutual fund skill in timing market volatility and liquidity

Mutual fund skill in timing market volatility and liquidity

Persistence of multidimensional time‐varying skills of fund managers: A comparison of conventional and Islamic equity funds

Research on Liquidity Preferences of Mutual Fund

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