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Mutual fund alpha and daily market-timing ability

Author

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  • Qiang Bu

Abstract

Purpose - This study aims to examine whether mutual funds can earn daily alpha and time daily market return. Design/methodology/approach - Based on the Treynor and Mazuy (1966) model and the Henriksson and Merton (1981) model, the author tests the daily market-timing ability of actual mutual funds and bootstrapped mutual funds. Findings - The author finds that daily alpha and daily market-timing ability can come from pure luck. In addition, the relation between fund alpha and market-timing ability is at best minimal. Originality/value - Using bootstrapped funds as the benchmark, this study shows that daily fund market is overall efficient.

Suggested Citation

  • Qiang Bu, 2019. "Mutual fund alpha and daily market-timing ability," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 36(3), pages 662-681, July.
  • Handle: RePEc:eme:sefpps:sef-09-2018-0277
    DOI: 10.1108/SEF-09-2018-0277
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    Cited by:

    1. Zambrana, Rafael & Zapatero, Fernando, 2021. "A tale of two types: Generalists vs. specialists in asset management," Journal of Financial Economics, Elsevier, vol. 142(2), pages 844-861.
    2. Sanaullah & Muhammad Shahbaz Khan & Dr. Amna Noor & Salleh Khan, 2021. "An Investigation of Market Timing Ability of Mutual Fund Managers in Pakistan," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 3(1), pages 56-68, june.

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