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Market Timing and Selectivity Performance: A Cross-Sectional Analysis of Malaysian Unit Trust Funds

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  • Soo-Wah Low

Abstract

This study examines the extent to which fund characteristics contributes to explaining fund returns differentiated by managers´ stock picking and market timing abilities. The findings show that funds characterized by high exposures to broad market movements have good timing returns but show poor selectivity performance, suggesting the presence of activity specialization among fund managers. It is shown that large funds enhance managers´ timing returns, reflecting the efficiencies of large funds in responding to market-wide movements. However, as the size of the fund gets larger, managers find it more challenging to identify worthwhile investments and hence results in poor selectivity performance.

Suggested Citation

  • Soo-Wah Low, 2012. "Market Timing and Selectivity Performance: A Cross-Sectional Analysis of Malaysian Unit Trust Funds," Prague Economic Papers, University of Economics, Prague, vol. 2012(2), pages 205-219.
  • Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:2:id:419:p:205-219
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    References listed on IDEAS

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    1. Roger Otten & Dennis Bams, 2002. "European Mutual Fund Performance," European Financial Management, European Financial Management Association, vol. 8(1), pages 75-101.
    2. Dahlquist, Magnus & Engström, Stefan & Söderlind, Paul, 2000. "Performance and Characteristics of Swedish Mutual Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(03), pages 409-423, September.
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    9. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    10. Miguel A. Ferreira & Aneel Keswani & António F. Miguel & Sofia B. Ramos, 2013. "The Determinants of Mutual Fund Performance: A Cross-Country Study," Review of Finance, European Finance Association, vol. 17(2), pages 483-525.
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    More about this item

    Keywords

    unit trust fund; market timing; security selection; fund characteristics; fund performance;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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