Market Timing and Selectivity Performance: A Cross-Sectional Analysis of Malaysian Unit Trust Funds

Abstract

This study examines the extent to which fund characteristics contributes to explaining fund returns differentiated by managers’ stock picking and market timing abilities. The fi ndings show that funds characterized by high exposures to broad market movements have good timing returns but show poor selectivity performance, suggesting the presence of activity specialization among fund managers. It is shown that large funds enhance managers’ timing returns, refl ecting the effi ciencies of large funds in responding to market-wide movements. However, as the size of the fund gets larger, managers fi nd it more challenging to identify worthwhile investments and hence results in poor selectivity performance.