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Monthly Measurement of Daily Timers

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  • William Goetzmann
  • Jonathan Ingersoll
  • Zoran Ivkovich

Abstract

This paper addresses the bias associated with parametric measurement of timing skill based on monthly timer returns when timers can make daily timing decisions. Simulations suggest that the classic Henriksson-Merton parametric measure of timing skill is weak and biased downward when applied to the monthly returns of a daily timer. The paper proposes an adjustment that mitigates this problem without the need to collect daily timer returns. Four tests of timing skill, carried out on a sample of 558 mutual funds, show that very few funds exhibit statisticall

Suggested Citation

  • William Goetzmann & Jonathan Ingersoll & Zoran Ivkovich, 1998. "Monthly Measurement of Daily Timers," Yale School of Management Working Papers ysm88, Yale School of Management, revised 01 Oct 2000.
    • Handle: RePEc:ysm:somwrk:ysm88
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    File URL: http://icfpub.som.yale.edu/publications/2442
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    References listed on IDEAS

    as
    1. Admati, Anat R, et al, 1986. "On Timing and Selectivity," Journal of Finance, American Finance Association, vol. 41(3), pages 715-730, July.
    2. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March.
    3. Admati, Anat R & Ross, Stephen A, 1986. "Corrigendum [Measuring Investment Performance in a Rational Expectations Equilibrium Model]," The Journal of Business, University of Chicago Press, vol. 59(2), pages 367-367, April.
    4. Brown, Stephen J, et al, 1992. "Survivorship Bias in Performance Studies," The Review of Financial Studies, Society for Financial Studies, vol. 5(4), pages 553-580.
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