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| Author: | Goetzmann, W. N. Ingersoll, J. Jr. Ivkovic, Z. |
| Title: | Monthly Measurement of Daily Timers |
| Journal: | Journal of Financial and Quantitative Analysis
2000 : SEP, VOL. 35:3, p. 257-290 |
| Index terms: | FINANCE ACCOUNTING MEASUREMENT |
| Language: | eng |
| Abstract: | This paper addresses the bias associated with parametric measurement of timing skill based on monthly timer returns when timers can make daily timing decisions. Simulations suggest that the classic Henriksson-Merton parametric measure of timing skill is weak and biased downward when applied to the monthly returns of a daily timer. The paper proposes an adjustment that mitigates this problem without the need to collect daily timer returns. Four tests of timing skill, carried out on a sample of 558 mutual funds, show that very few funds exhibit statistically significant timing skill. More encompassing, the adjusted-FF3 test is the least biased measure of timing skill among the four-it provides for a sharper inference regarding timing skill and helps mitigate biases associated with the choice of investment style. |
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