What style-timing skills do mutual fund “stars” possess? |
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| Institution: | 1. Department of Finance, National Chung Cheng University, Taiwan;2. School of Management and Languages, Mary Burton Building, Heriot-Watt University, Edinburgh, EH14 4AS, United Kingdom;3. Warwick Business School, Coventry, United Kingdom;1. Deakin Business School, Department of Finance, Deakin University, Geelong, Australia;2. Centre for Applied Financial Studies, School of Commerce, University of South Australia, Australia;3. School of Economics, Finance, and Marketing, RMIT University, Australia |
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| Abstract: | Recent studies suggest that certain growth-oriented fund managers have substantial skill but do not stipulate the particular skills that they possess. We examine in detail the style-timing abilities of growth-oriented equity mutual funds over the period from 1993 to 2006. We find that an important contributor to the persistent abnormal returns is growth timing, i.e., switching stocks along the value/growth continuum, and that this explains at least 45% of the abnormal returns reported. No other style-timing skills are observed. Our results also demonstrate that it is easy to misidentify growth timing as market timing. |
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