Abstract
PurposeThis study aims to examine whether mutual funds can earn daily alpha and time daily market return.Design/methodology/approachBased on the Treynor and Mazuy (1966) model and the Henriksson and Merton (1981) model, the author tests the daily market-timing ability of actual mutual funds and bootstrapped mutual funds.FindingsThe author finds that daily alpha and daily market-timing ability can come from pure luck. In addition, the relation between fund alpha and market-timing ability is at best minimal.Originality/valueUsing bootstrapped funds as the benchmark, this study shows that daily fund market is overall efficient.
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