Short-term volatility timing: A cross-country study

Abstract

In this paper, we examine how mutual fund managers behave to fluctuations in market volatility. We use a sample of daily return from countries around the world to evaluate how manager perform to publicly available information. There is a lack of empirical studies that examine the relation between conditional market returns and conditional volatility on a global scale; we provide evidence across countries to answer this question. Our study provides new evidence about conditional mutual fund performance across countries. We find that during periods of high market volatility mutual funds reduce market exposure across all countries; this implies that systemic risk is particularly sensitive to changes in market volatility around the world.