Detecting mutual fund timing ability using the threshold model

Ping Huang Chou, Huimin Chung*, Erh Yin Sun

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

This paper proposes a new method based on threshold regression to test mutual fund market-timing abilities. The traditional Henriksson and Merton model is shown to represent only a special case within the proposed model. The potential bias of using the traditional model is demonstrated and it is argued that the proposed model provides more accurate inferences on the market-timing effects of mutual funds. The empirical results for a set of randomly-selected US mutual funds indicate the superior performance of the proposed method in detecting the market-timing ability.

Original languageEnglish
Pages (from-to)829-834
Number of pages6
JournalApplied Economics Letters
Volume12
Issue number13
DOIs
StatePublished - 20 Oct 2005

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