Abstract
This paper empirically investigates the performance of market-timing strategies effectively used by investors in Emerging Markets (EMs). We identify short-term determinants of mutual fund flows into EM equity and fixed income, finding a well-established flow-performance relation. Hence, we verify whether investors make good timing decisions with a statistic hereafter referred to as “performance gap”. We find that the average performance gap is negative and statistically significant for all funds. It is equal to -0.05% per month for equity and -0.06% for fixed income. Although gaps remain negative regardless of the strategy declared by the fund manager, corporate and growth funds exhibit the worst performance.
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