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New Test Statistics for Market Timing with Application to Emerging markets

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Author Info
A. Sancetta
Satchell, S.E.

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Abstract

We provide a new framework for identifying timing. Our analysis focuses on the smoothed joint history of the fund with the benchmark. The approach is fully non-parametric. Therefore, it has the advantage of avoiding the misspecification problems so common in this literature. The test statistic is some rank preserving function of a second order U-process. This empirical process allows us to define a set of statistics for market timing. We state the relevant asymptotic distribution. Some of these statistics are used to study the timing component of emerging markets funds using the dataset of Hwang and Satchell (1999).

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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0222.

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Length: 37
Date of creation: Sep 2002
Date of revision:
Handle: RePEc:cam:camdae:0222

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Related research
Keywords: market timing; emerging markets; U-process; Kendall’s Tau; invariance principle; strong mixing;

Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods

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  1. Hwang, Soosung & Satchell, Stephen E, 1999. "Modelling Emerging Market Risk Premia Using Higher Moments," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(4), pages 271-96, October. [Downloadable!] (restricted)
  2. Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," Journal of Business, University of Chicago Press, vol. 54(4), pages 513-33, October. [Downloadable!] (restricted)
  3. Cumby, Robert E & Glen, Jack D, 1990. " Evaluating the Performance of International Mutual Funds," Journal of Finance, American Finance Association, vol. 45(2), pages 497-521, June. [Downloadable!] (restricted)
  4. Grinblatt, Mark & Titman, Sheridan, 1994. "A Study of Monthly Mutual Fund Returns and Performance Evaluation Techniques," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(03), pages 419-444, September. [Downloadable!]
  5. Grinblatt, Mark & Titman, Sheridan D, 1989. "Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings," Journal of Business, University of Chicago Press, vol. 62(3), pages 393-416, July. [Downloadable!] (restricted)
    Other versions:
  6. Jagannathan, Ravi & Korajczyk, Robert A, 1986. "Assessing the Market Timing Performance of Managed Portfolios," Journal of Business, University of Chicago Press, vol. 59(2), pages 217-35, April. [Downloadable!] (restricted)
  7. Glosten, L. R. & Jagannathan, R., 1994. "A contingent claim approach to performance evaluation," Journal of Empirical Finance, Elsevier, vol. 1(2), pages 133-160, January. [Downloadable!] (restricted)
    Other versions:
  8. Kon, Stanley J, 1983. "The Market-Timing Performance of Mutual Fund Managers," Journal of Business, University of Chicago Press, vol. 56(3), pages 323-47, July. [Downloadable!] (restricted)
  9. Stephen Satchell & Soosung Hwang, 1999. "Modelling Emerging Market Risk Premia Using Higher Moments," Working Papers wp99-17, Warwick Business School, Financial Econometrics Research Centre. [Downloadable!]
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