Timing the investment grade securities market: Evidence from high quality bond funds

Boney, Vaneesha; Comer, George; Kelly, Lynne

doi:10.1016/j.jempfin.2008.06.005

Cited by 44 publications

(16 citation statements)

References 35 publications

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“…For investment grade bonds, Boney et al . () using a return attribution approach (Sharpe, ) find negative timing between cash and bonds and across the bond maturity spectrum. Ammann et al .…”

Section: Previous Studiesmentioning

confidence: 99%

Market and Style Timing: German Equity and Bond Funds

Cuthbertson

Hayley

Nitzsche

2015

Eur Financial Management

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Abstract:We apply parametric and non-parametric estimates to test market and style timing ability of individual German equity and bond mutual funds using a sample of over 500 equity and 350 bond funds, over the period [1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005][2006][2007][2008][2009]. For equity funds, both approaches indicate no successful market timers in the 1990-1999 or 2000-2009 periods, but in 2000-2009 the non-parametric approach gives fewer unsuccessful market timers than the parametric approach. There is evidence of successful style timing using the parametric approach, and unsuccessful style timing, particularly in the 2000-2009 period. There is evidence of positive and negative bond timing in the 2000-09 period.Keywords : Mutual funds performance, market timing. JEL Classification: C14, G112 MARKET AND STYLE TIMING: GERMAN EQUITY AND BOND FUNDS IntroductionAfter the US, UK, Japan and France, Germany is the 5 th largest asset management center in the world. Mutual fund investments in Germany account for around $335 billion under management. With ongoing political and financial restructuring it is expected that individuals will have to become increasingly responsible for future long-term pension savings. Therefore it is expected that the mutual fund industry will grow rapidly over the medium term as reforms to private pension provision place greater emphasis on defined contribution pensions (i.e. 'Riester Rente') and reforms result in a less generous state pension. As in other countries such as the US and UK, mutual fund assets are predominantly held in active funds -this paper examines whether active German equity and bond funds engage in successful market and style timing.Mutual fund performance is usually discussed in terms of selectivity (alpha) and timing and is analysed using either returns data or (where available) portfolio holdings data. Returns-based studies may be further subdivided into parametric and non-parametric approaches. To model timing effects in the parametric approach, a factor model is augmented with additional non-linear functions of the factors (Treynor andMazuy 1966 andHenriksson andMerton 1981). Parametric models of timing may be unconditional or conditional on publicly available information, which allows for time-varying alphas and factor loadings Schadt 1996, Christopherson, Ferson and Glassman 1998).The parametric approach measures both the response to the timing signal and the strength of that response (in terms of the size of the change in beta). The non-parametric returnsbased approach provides a measure of the quality of the manager's forecast, independent of the aggressiveness of the response due to changing factor loadings 1 .In this study we use a large (survivorship-bias free) sample of over 500 equity and 350 bond funds, over the last 20 years (1990)(1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009). The key contributions of the paper are as fol...

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Section: Previous Studiesmentioning

confidence: 99%

Market and Style Timing: German Equity and Bond Funds

Cuthbertson

Hayley

Nitzsche

2015

Eur Financial Management

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“…On the other hand, from an investor's perspective, identifying superior managers is an important objective. Concretely, the results obtained by Boney et al (2009) when analysing the timing of bond funds confirm that, in spite of the perverse timing ability between cash and bonds and across bonds of various maturities, investors value funds for the diversification benefits they provide within the investors' overall portfolio. On the other hand, the timing abilities could influence on how investors assign their savings among the different investment vehicles available and consequently, it could encourage the investment in private pension schemes.…”

Section: Introductionmentioning

confidence: 76%

“…However, one should bear into mind that the indices used in this research are not available to individual investors at zero costs. 17 Boney et al (2009) also justified the survival of the funds of their sample despite their negative performance due to the value investors place on the portfolio diversification benefits. 12 <-2% <-1% <-0.5% <0% <0.5% <1% <2% <3% >3%…”

Section: Performance Considering Market Timing Skillsmentioning

confidence: 97%

“…It should be noted that although neither pension plan sample is subject to survivorship bias, both potentially suffer from look-ahead bias. In fact, as mentioned by Comer (2006) and Boney et al (2009) among others, some look-ahead bias is inherent in tests of market timing ability where a minimum survival period is necessary to obtain robust estimations. Specifically, the table list a random number assigned to each pension plan and the range of reported portfolio weights reported over the time period analysed (2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007).…”

Section: Fund Samplementioning

confidence: 99%

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Performance evaluation of balanced pension plans

Andreu

Swinkels²

2012

Quantitative Finance

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This paper examines the ability of balanced pension plan managers to successfully time the equity and bond market and select the appropriate assets within these markets. In order to evaluate both market timing abilities in these balanced pension plans, we extend the traditional equity market timing models to also account for bond market timing. As far as we know, we are among the first to apply this multifactor timing model to investigate equity and bond market timing simultaneously. This performance evaluation has been conducted on two samples of Spanish balanced pension plans, one with Euro Zone and one with World investment focus. This allows us to decompose managers' skills in three components: selectivity, equity market timing, and bond market timing. Our findings suggest that the average stock picking ability of pension plans is positive. World schemes tend to have positive bond timing skills, while Euro Zone pension plans are on average not able to time equity or bond markets. Free Keywords balanced pension plans, market timing, performance evaluation, stock picking Availability The ERIM Report Series is distributed through the following platforms:

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“…Blake, Elton, and Gruber [1993] find underperformance in the United States from 1979 to 1988; Dahlquist, Engstrom, and Soderlind [2000] observe underperformance in Sweden from 1992 to 1997; Huij and Derwall [2008] generally observe negative alphas in their U.S. sample from 1990 to 2003; and, in a large sample with the longest time frame, Chen and Qin [2012] find negative alphas in U.S. corporate bond funds from 1991 to 2009. Boney, Comer, andKelly [2009] andChen, Ferson, andPeters [2010] both test for market timing and find no ability for bond managers to anticipate market returns. Boney, Comer, andKelly [2009] andChen, Ferson, andPeters [2010] both test for market timing and find no ability for bond managers to anticipate market returns.…”

Section: Literature Reviewmentioning

confidence: 99%