Assessing foreign funds geographical focus timing skill
Abstract
Purpose
This paper aims to study the market timing skill of USA-based foreign open-end mutual funds in their geographical focus market.
Design/methodology/approach
The authors use daily fund data and two multi-factor extensions of the Treynor-Mazuy (1966) and Henriksson-Merton (1981) timing models to measure US-based foreign funds’ market timing skill during 1999 to 2010. In particular, the authors study fund managers’ skill to time their geographical focus market.
Findings
The authors report that, in general, foreign funds do not accurately time their geographical focus market. However, during January 2008 to December 2010, the sub period that includes the 2008 global financial crisis, most foreign funds in this sample not only focused on their domestic market, the USA, but also demonstrated statistically significant, good timing skill.
Originality/value
Although US-based foreign funds’ market-timing skill is not an unexplored topic, this study is the first to consider these funds’ skill to time their geographical focus market, a skill that has been studied in the context of hedge funds.
Keywords
Acknowledgements
The authors appreciate the comments of Niklas F. Wagner (the editor) and two anonymous referees. The authors also thank the research assistance of José Davis-Pellot.
Citation
Rodríguez, J. and Romero, H. (2016), "Assessing foreign funds geographical focus timing skill", Studies in Economics and Finance, Vol. 33 No. 2, pp. 209-221. https://doi.org/10.1108/SEF-11-2013-0168
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited