In this performance evaluation study, two questions are addressed. First, do active fund managers possess macro and micro forecasting skills that deliver superior risk-adjusted returns? Second, what is the nature of market timing/stock selectivity trade off in the generation of alpha? The answers from this study are as follows: as an industry, managers delivered inferior returns for superannuation investors for the period 1991 through 1999. The study provides little evidence that the Australian funds management industry holds sufficient macro and/or micro forecasting abilities to generate positive alpha. While previous research has found that inferior market timing decisions are compensated for by superior stock selection skills, this study finds no substantive inverse relationship between timing and selectivity.
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Find related papers by JEL classification: G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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