Market timing around the world

Abstract

This article challenges existing studies of mutual fund market timing that have found little evidence to support timing ability. Using a sample of daily returns for 35 countries, Vidal, Vidal-Garcia, and Boubaker find that more than a third of mutual funds show significantly positive market timing ability across all countries. The authors demonstrate that using daily returns rather than monthly returns increases the number of significant estimates of timing ability, indicating that observation frequency is relevant when examining fund performance. They also find evidence for market timing in recessions and document that the effect of the business cycle on market timing is much stronger for extremely successful fund managers. Using a set of synthetic fund returns to control for spurious results, they show that the measured market timing is not a spurious statistical result.