Measuring the Timing Ability and Performance of Bond Mutual Funds
AbstractThis paper evaluates the ability of bond funds to "market time" nine common factors related to bond markets. Timing ability generates nonlinearity in fund returns as a function of common factors, but there are several non-timing-related sources of nonlinearity. Controlling for the non-timing-related nonlinearity is important. Funds' returns are more concave than benchmark returns, and this would appear as poor timing ability in naive models. With controls, the timing coefficients appear neutral to weakly positive. Adjusting for nonlinearity the performance of many bond funds is significantly negative on an after-cost basis, but significantly positive on a before-cost basis.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15318.
Date of creation: Sep 2009
Date of revision:
Publication status: published as "Measuring the Timing Ability and Performance of Bond Mutual Funds," with Yong Chen and Helen Peters, 2010, Journal of Financial Economics 98(1), 72-89.
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Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-11 (All new papers)
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