Abstract:
There is a considerable body of literature that examines the behaviour of institutional
investors as a potential source of market price movement. Most existing studies focus
on the market timing abilities of active fund managers and find mixed evidence for
their fund timing skills. However, few studies have investigated fund manager timing
abilities within segments of the market, such as factor timing and sector timing. This
study investigates the style timing behaviour of US domestic equity funds existing at
any time during the period 1_2-2002.
Specifically, I examine the timing activities of actively managed mutual funds within
different market segments based on such established systematic risk factors as size,
book-to-market, momentum, and across different fund styles such as aggressive
growth, growth and income, and small company funds, etc.
Mutual fund timing strategy can be viewed as the fund manager's response to hislher
private information regarding future factor premiums. Instead of directly observing
how fund managers make their timing decisions, an alternative approach is to look at
the direct outcomes of their decisions, which are related to the factor timing loadings
derived from a factor timing model. I significantly expand on the work of Bollen and
Busse (2001) and Volkman (l~ by combining systematic risk factors unique to
equity markets with timing factors unique to actively managed portfolios. Within this
empirical timing-activity evaluation framework, I additionally investigate fund timing
behaviour in the context of Morningstar star rating performance record, investment
objectives, fund age, turnover, and load expense, etc.
This Ph.D. is an original contribution to the literature of fund timing activities, which
seeks to contribute to our understanding in terms of investigating mutual fund
managers' timing strategies with respect to specific systematic risk factors and their
evolution over time. This research has important implications both for extant asset
pricing theories and for practitioners especially in the evaluation of portfolio
performance and investigation of fund managers' timing activities.
