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Passive timing effect in portfolio management

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  • J. C. Matallin
  • A. Fernandez-Izquierdo
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    Abstract

    The primary objective of the present study is to analyse the extent of the passive timing effect in portfolio management. This effect is produced when a portfolio which is not managed actively shows signs of instability in its level of systematic risk. By contrast, market timing involves active management of the portfolio and therefore changes to the level of systematic risk in order to anticipate market movements in an appropriate manner. This study proposes a dynamic beta model which incorporates the effect of passive timing attributable to the accumulated evolution of weightings for the assets that make up the portfolio. The results demonstrate the importance of this effect when applying performance and market timing measures in order to evaluate portfolio results, such as those of mutual funds.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 35 (2003)
    Issue (Month): 17 ()
    Pages: 1829-1837

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    Handle: RePEc:taf:applec:v:35:y:2003:i:17:p:1829-1837

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    4. Henriksson, Roy D, 1984. "Market Timing and Mutual Fund Performance: An Empirical Investigation," The Journal of Business, University of Chicago Press, vol. 57(1), pages 73-96, January.
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