Timing and selectivity in Portuguese mutual fund performance

We extend the international evidence on timing and selectivity skills of fund managers by applying the Henriksson and Merton [Henriksson, R., Merton, R., 1981. On market timing and investment performance. II. Statistical procedures for evaluating forecasting skills. J. Bus. 54, 513–533] model to Portuguese based mutual funds investing in local, European and International equity.

The results show that managers do not exhibit selectivity and timing abilities, and there is even some evidence of negative timing. Furthermore, we observe a distance effect on stock selection performance, since fund managers that invest locally seem to perform better that those who invest in foreign markets. However, this effect is reverted with respect to market timing skills of fund managers, suggesting that International fund managers are more focused in market timing strategies.