Liquidity Timing in the Higher Moment Framework: Evidence from Bank Affiliated Fund

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In this paper, we provide the first evidence of liquidity timing ability of mutual funds outside US. We propose a new model to study liquidity timing ability of mutual funds. The model matches the higher moment framework required for emerging market study. We find that on the average the mutual funds in Thailand have liquidity timing ability. At portfolio level, the results show that low performance and high performance funds clearly have inverse liquidity timing ability. The low performance funds have negative liquidity timing ability, whereas the higher performance funds exhibit positive liquidity timing ability. Our results of liquidity timing hold in higher moment framework. We further analyze the effect of bank-mutual funds relationship and find that the bank-related mutual funds have positive liquidity timing ability of mutual funds while we find no evidence of this liquidity timing for non-bank related mutual funds.