Cokurtosis and the Ability of Mutual Fund Managers

Abstract

In the present study we propose a new higher-order co-moment timing ability for fund managers. Top-performing fund managers successfully time higher-order co-moments of their investment portfolios, generating significantly positive abnormal returns. However, worst-performing funds show no abilities. The zero-trading strategy works well with all timing ability models, where the zero-cost trading profit of the cokurtosis timing model generates the 0.091% per month abnormal return. The bootstrap test shows that the higher-order co-moment timing ability is not purely driven from luck. The robustness test ensures the main findings.