Stock Selection Ability Research Articles

Hedge fund activism, R&D efficiency and firm value

We investigate the effectiveness of hedge fund activism in addressing inefficient R&D investment and creating long-term value at target firms. Using an endogenous growth model to estimate efficient R&D investment levels, we find target firms exhibit a tendency to overinvest in R&D. The likelihood of being targeted and activism announcement returns increase with R&D overinvestment. Despite observable cuts in R&D expenditure following activism, our analysis shows no significant improvement in R&D efficiency over the subsequent three years. Additional tests, controlling for the activist’s objectives, reputation, and stock selection ability, reveal a negative impact of activism on value creation. Our study offers important insights into how hedge fund activism shapes corporate R&D strategies and highlights challenges in achieving sustainable innovation and value enhancement through activist interventions.

Exploring the Timing Stock Selection Ability of U.S. Active Index Fund ETF Based on T-M Model

Based on past research experiences, the passage briefly reviews the important tools used as an important tool for the analysis of stock selectivity ability and market timing ability, The T-M model. Results found that from 2022 to 2023, the funding groups selected do not have the effective ability of timing and stock selection, also the government policies and other external factors during the period affect the whole market trending. The Jensen model and the subsequent T-M model have been widely used to measure whether the return-on-investment index funding portfolio has achieved the expected effect, which has a strong correlation and provides a good calculation standard for investors and funding investment managers holding funding portfolios. The model provides an effective reference for following stakeholders to know the market trend and control their investment risks better.

Retail Trading and Return Predictability in China

Abstract Using comprehensive account-level data, we separate Chinese retail investors into 5 groups and document strong heterogeneity in trading dynamics and performances. Retail investors with smaller account sizes cannot predict future returns correctly, display daily momentum patterns, fail to process public news, and show overconfidence and gambling preferences, while retail investors with larger account balances predict future returns correctly, display contrarian patterns, and incorporate public news in trading. Using performance measures established in previous literature, we find that smaller retail investors suffer from poor stock selection abilities and trading costs, while large retail investors’ stock selection abilities are offset by trading costs.

Do big data mutual funds outperform?

The study aims to empirically evaluate the effectiveness of big data in aiding investors with their decision-making. Our findings indicate that big data funds do not exhibit superior performance compared to their human-managed counterparts. The big data factor utilized in the investment strategies of big data funds does not enhance their stock-selection ability. Additionally, the performance of big data funds is not more persistent than that of traditional funds and is significantly influenced by fund managers’ skills, which shows that big data technology and AI algorithms can not replace fund managers in decisions. Overall, these findings suggest that, thus far, big data technology has not yielded significant improvements in fund performance.

How does oil market volatility impact mutual fund performance?

The aim of this paper is twofold. First, we investigate whether oil market volatility affects fund performance. Second, we examine whether oil volatility impacts fund managers' ability to select stocks and to time oil volatility. Our analysis is based on the Saudi Arabian market, a major developing economy and the world's largest oil producer. Our first main finding is that oil market volatility has a significant negative impact on mutual fund performance. Notably, this result holds robustly across all the volatility and performance measures applied in our analysis. Secondly, the risk-adjusted performance evidence suggests that high oil volatility reduces managers' stock selection ability. Further empirical analysis is consistent with the notion that skilled mutual funds are able to consistently generate alpha but evidence is mixed on whether they can improve performance by timing oil market volatility. Our study presents new evidence on a fast-growing emerging market and identifies important practical implications for the mutual fund industry which help investors, academics and regulators to better understand the functioning of this market.

Stock Selection and Market Timing Ability of Nepalese Mutual Funds

This study evaluates the performance of Nepalese mutual fund managers’ stock selection and market timing abilities. This study performed the investigation on the weekly data of 5 mutual funds from December 28, 2017 to March 2, 2023 spanning 270 weeks. To serve our objective, the stock selection skills of the fund managers were assessed using average return, Sharpe ratio, Treynor ratio, Information ratio and Jensen’s alpha. The study found strong evidence supporting risk management ability in all of the mutual fund schemes as demonstrated by beta coefficient below unity and significant stock selection ability in 2 out of the 5 mutual fund schemes. Furthermore, the positive values of alpha although not statistically significant indicates stock selection ability of the fund managers. On the other hand, Treynor and Mazuy’s Unconditional Market timing model was employed to test the market timing skill of fund managers. The test results did not indicate any significant positive market timing skills but one of the mutual fund schemes exhibited statistically significant negative market timing. Thus, the Nepalese fund managers aptly demonstrated stock selection ability but they did not demonstrate any positive market timing skills indicating that fund managers typically relied on stock selection to outperform the Benchmark Index rather than market timing skills. Int. J. Soc. Sc. Manage. Vol. 10, Issue-3: 47-54.

Factors Affecting Stock Selection and Market Timing Ability Between the Developed Country and Emerging Countries in Asean Markets

Objective: This research is designed to propose empirical evidence on factors affecting stock selection ability and market timing ability. Theoretical framework: Recent research found that most equity mutual funds underperform the market return due to a lack of stock selection and market timing abilities. However, rarely do they propose evidence of factors affecting the existence of these abilities Method: There are two-panel regression models developed in this research to show evidence of factors affecting stock selection and market timing abilities. The Dumitrescu–Hurlin (DH) test is used to gain a comprehensive understanding of the causality relationship between the variables Results and Conclusion: Based on observation of three ASEAN countries, this research proposes empirical evidence that the growth of fund size, volatility of the fund’s net asset value (NAV), and performance indicators of the underlying assets affect the stock selection ability differently in the respective countries. Similarly, the growth of fund size, volatility of the fund’s NAV, and macroeconomic indicators also affect the market timing ability differently Implications of the research: Therefore, the implementation of investment strategies in the three observed markets considers factors affecting the existence of the two abilities, effectively generating outperforming returns. Originality/value: Recent studies focused more on whether equity mutual funds are managed with stock selection and market timing abilities but not on factors affecting those abilities. This research proposes empirical evidence on factors affecting those abilities in different markets through econometrics analyses on panel data and the Dumitrescu–Hurlincausality test.

The Effect of Stock Selection Ability, Market-Timing Ability, and Fund Cash Flow on the Performance of Sharia Equity Mutual Funds (Study During the Covid-19 Pandemic, 2020-2021)

Abstract: The Coronavirus pandemic has had an extraordinary impact on the economies of countries in the world, including Indonesia. This economic condition was reflected in the collapse of the stock market index in Indonesia. Mutual funds are an investment alternative that has convenience for investors who want to invest but need more investment skills and time. Islamic stock mutual funds are one of the choices in investing because Sharia values guide their management. The performance of Islamic equity mutual funds during the Covid-19 pandemic has declined; the number of Islamic equity mutual funds looks stagnant, while the NAV value has fallen. This study aimed to test the effect of stock selection ability, market-timing ability, and fund cash flow on the performance of Islamic equity mutual funds during the Covid-19 pandemic. The population in this study is all Islamic equity mutual funds traded during the 2020-2021 period. The sampling technique in this study used purposive sampling. The samples obtained were 39 Sharia equity mutual funds that reported monthly NAV on the OJK website. The data were tested using regression with the help of Eviews software version 12. The results of this study indicate that stock selection ability, market-timing ability, and fund cash flow partially have a positive and significant effect on the performance of Islamic equity mutual funds. Abstrak: Pandemi Coronavirus berdampak luar biasa bagi perekonomian negara-negara di dunia termasuk Indonesia. Kondisi ekonomi tersebut tercermin pada runtuhnya IHSG pasar modal di Indonesia. Reksa dana merupakan salah satu alternatif investasi yang memiliki kemudahan bagi para investor yang ingin berinvestasi tetapi memilliki keterbatasan keahlian investasi dan waktu. Reksa dana saham syariah dijadikan salah satu pilihan dalam berinvestasi dikarenakan pengelolaannya yang berpedoman pada nilai-nilai syariah. Kinerja reksa dana saham syariah pada masa pandemi covid-19 terlihat menurun, jumlah reksa dana saham syariah terlihat stagnan sedangkan nilai NABnya turun. Tujuan penelitian ini untuk menguji menguji pengaruh stock selection ability, market timing ability, dan fund cash flow terhadap kinerja reksa dana saham syariah pada masa pandemi covid-19. Populasi dalam penelitian ini adalah seluruh reksa dana saham syariah yang diperdagangkan selama periode 2020-2021. Teknik pengambilan sampel pada penelitian ini menggunakan purposive sampling. Sampel yang diperoleh sebanyak 39 reksa dana saham syariah yang melaporakan NAB bulanan di website OJK. Data diuji dengan menggunakan regresi dengan bantuan software Eviews versi 12. Hasil penelitian ini menunjukkan bahwa stock selection ability, market timing ability, dan fund cash flow secara parsial berpengaruh positif dan signifikan terhadap terhadap kinerja reksa dana saham syariah.

Analyzing the Ability of Investment Managers in Equity Mutual Funds during the Covid-19 Pandemic in Indonesia

Mutual fund is one of the investment instruments widely used as an investment option. There are two essential things to be considered by the Investment Manager as a mutual fund manager: the stock selection and the market timing ability. The Covid-19 pandemic has caused many investors to experience potential investment losses. Understanding stock selection and market timing will be needed for determining which Investment Managers perform well in managing equity mutual fund, especially while dealing with the Covid-19 pandemic. The objective of this study is to analyze the ability of Investment Managers to perform stock selection and market timing, the performance of equity mutual fund, and the effect of stock selection and market timing ability on the performance of equity mutual fund in Indonesia. This study applies the Fama net selectivity methods to assess stock selection ability and Treynor-Mazuy and Henriksson-Merton models to analyze market timing ability. Sharpe, Treynor, and Jensen's alpha methods are also used for measuring mutual fund performance. The data is processed per mutual fund to recognize each mutual fund's stock selection and market timing ability. Furthermore, the research spans two time periods: before and following the Covid-19 pandemic. A dataset of 104 equity mutual funds from 2016-2021 has been analyzed. The findings show that only 9 and 12 Investment Managers have stock selection ability prior to and following the Covid-19 pandemic, respectively. According to Treynor Mazuy model, there are only two Investment Managers with market timing ability prior to the Covid-19 pandemic, and only twelve Investment Managers have market timing ability during the Covid-19 pandemic, according to the Henriksson-Merton model. Every mutual fund with stock selection ability outperformed the benchmark. However, not all equity mutual fund with market timing ability outperformed the benchmark.

Stock Selection and Market Timing Ability to Increase Indonesia's Equity Mutual Fund Performance

This study investigates the effect of stock selection, market timing, and fund size on the mutual fund’s performance with Covid-19 as a moderating variable. The sample data is limited to the listed conventional mutual funds supervised by the financial service authorization from 2014 to 2021, denominated in Rupiah currency, have a complete report, and have more than Rp 350 billion in fund equities. The sample data implements twenty-eight of the listed conventional mutual funds and is examined by a random method of Panel data multi-regression with moderated regression analysis (MRA). The result shows that market timing positively affects, and Covid-19 can enhance the effect of stock selection on the mutual fund’s performance. Meanwhile, stock selection, fund size, and Covid-19 do not affect the mutual fund’s performance. Covid-19 cannot moderate the effect of market timing and fund size on the mutual fund’s performance. Fund managers highlight market timing as a crucial indicator of obtaining more returns, and Covid-19 is the best moment to select and collect potential stock at affordable prices and trade them to get more returns after the crisis. DOI: 10.26905/jkdp.v27i4.11047

Stock Selection and Market Timing Ability of SBI Mutual Fund

Stock Selection and Market Timing Ability of SBI Mutual Fund

Conceptual framework for testing the market timing and stock selection ability of mutual fund managers’ in India

Conceptual framework for testing the market timing and stock selection ability of mutual fund managers’ in India

Intelligent Optimization Based Multi-Factor Deep Learning Stock Selection Model and Quantitative Trading Strategy

With the rapid development of financial research theory and artificial intelligence technology, quantitative investment has gradually entered people’s attention. Compared with traditional investment, the advantage of quantitative investment lies in quantification and refinement. In quantitative investment technology, quantitative stock selection is the foundation. Without good stock selection ability, the effect of quantitative investment will be greatly reduced. Therefore, this paper builds an effective multi-factor stock selection model based on intelligent optimization algorithms and deep learning and proposes corresponding trading strategies based on this. First of all, this paper selects 26 effective factors of financial indicators, technical indicators and public opinion to construct the factor database. Secondly, a Gated Recurrent Unit (GRU) neural network based on the Cuckoo Search (CS) optimization algorithm is used to build a stock selection model. Finally, a quantitative investment strategy is designed, and the proposed multi-factor deep learning stock selection model based on intelligent optimization is applied to practice to test its effectiveness. The results show that the quantitative trading strategy based on this model achieved a Sharpe ratio of 127.08%, an annualized rate of return of 40.66%, an excess return of 13.13% and a maximum drawdown rate of −17.38% during the back test period. Compared with other benchmark models, the proposed stock selection model achieved better back test performance.

Does investor sentiment affect fund crashes? Evidence from Chinese open-end funds

This paper aims to detect the impact of investor sentiment on the open-end fund crashes, drawing on the open-end stock funds and partial stock funds of China for the 2009–2019 period. The results show that the rise of investor sentiment will significantly increase the risk of the open-end fund crashes, which remains valid after robustness tests. Further researches indicate that the market timing and stock selection abilities of fund managers weaken the positive impact of investor sentiment on the open-end fund crashes, and the market illiquidity promotes the positive impact of investor sentiment on the open-end fund crashes.

Performance evaluation of Indian equity mutual funds: a bootstrap analysis

The majority of Indian studies on mutual funds have documented superior performance of equity funds vis-à-vis the market benchmark. The question is whether this superior performance, demonstrated by fund managers, is the result of genuine stock selection abilities or merely the outcome of luck. We apply a bootstrap statistical technique as suggested by Kosowski et al. (2006) to evaluate the performance of the Indian open-end, domestic growth-oriented equity mutual fund schemes over the 2000 to 2019 period. The bootstrap analysis helps to segregate genuine stock-selection skills from luck. Our findings signify that superior performance demonstrated by the top mutual funds cannot be attributed to the sampling variation (luck) and these fund managers do possess genuine stock-picking skills.

Does an Exchange-Traded Fund Converge to its Benchmark in the Long Run? Evidence from Ishares MSCI in Asia-Pacific Countries

This study examines the linkages between exchange-traded funds (ETFs) and their benchmark indices from 2013 to 2019 using iShares MSCI of ten Asia-Pacific countries. Our results show, first, that there is a long-run causality running from the benchmark index to ETFs. These findings imply that ETFs may replicate the performance of the benchmark index over the long run. Second, there is a unidirectional causal relationship from ETFs to the benchmark index in the short run, which indicates that benchmark index prices respond to the short-run changes in the ETF prices when new information is available. Third, there is a significant tracking error between ETFs and the benchmark index. This finding justifies the existence of stock selection and market timing abilities among the ETF managers. Lastly, fund managers add value to the ETFs and generate better than the market returns. This paper provides new evidence to support this new stylized fact of ETFs.

Analysis on Factors Affecting Performance of Indexing Investment

This article analyzes the current status of indexing investment performance in China and the characteristics of fund managers and fund management companies. It also theoretically analyzes the influence of these factors on indexing investment performance in terms of fund governance structure, characteristics of fund managers and fund companies, stock selection ability and timing ability. Next, it uses multiple regression analysis from three dimensions mentioned above to verify the influencing factors on investment performance. The results show that in terms of passive investment, fund tracking error is significantly negatively correlated with institutional holdings and fund managers’ stock selection ability, and significantly positively correlated with fund managers’ timing ability. Female fund managers’ tracking errors are smaller. Institutional investors play a positive role in promoting the performance of active investment. The fund manager’s stock selection ability can effectively reduce the fund’s sensitivity to target index fluctuations, and the fund manager’s timing ability can significantly improve the performance of fund allocation. Funds allocated by female fund managers will be less sensitive to target index fluctuations. Keywords: indexing investment, performance, fund management, fund managers DOI: 10.7176/RJFA/12-22-01 Publication date: November 30th 2021

INVESTORS' PERCEPTION TOWARDS MUTUAL FUND STUDY WITH REFERENCE TO EAST GODAVARI ANDHRA PRADESH

The mutual fund industry in India has registered significant growth since the liberalization of Indian Economy in 1991 and has emerged as a significant financial intermediary.The growing importance of Indian mutual funds may be noted in terms of the increased mobilization of funds and the increasing number of schemes and investors in the industry.The results show that there is a significant association between educational qualification of the investors and the risk tolerance level and occupation of the investors and the risk tolerance level.The results further indicate that there is no significant association between occupation of the investors and the level of knowledge of mutual fund and monthly savings of the investors and the level of knowledge of mutual fund.Therefore, the investors have to consider the prevailing rate of risk free returns and to compare the fund returns with it. Based on this the selection of schemes and the choice of investment avenues can be decided.Due to the fund man timing skill,stock selection ability,imperfect diversification the schemes had suffered with low return. Hence to increase the fund return the concerned fund managers have to improve all these skills.

An Empirical Investigation of the Performance of Fund Managers in Pakistan

This study aims to determine the stock selection ability and market timing ability of mutual fund managers, focusing on conventional funds and Islamic funds in Pakistan. Although there has been significant growth in the number and assets of mutual funds in recent years, few studies measure the performance of mutual funds managers. The scarcity of existing literature motivates this study. In this study, two models are used to measure the stock selection and market timing on a sample of conventional mutual funds and Islamic mutual funds over 2010 and 2019 using annual returns. Overall, the results indicate that the performance study of conventional mutual funds and Islamic mutual funds indicates that manager performance is not superior in all three portfolios, i.e., conventional funds, Islamic funds, and overall funds in over sample period. This also indicates that both Conventional and Islamic fund managers do not outperform the market (KSE 100 index). Thus, there is a lack of market timing ability. Using Tranoy and mazuy and Jansen models found a lack of stock selection and market timing ability of mutual fund managers in Pakistani mutual funds. In this study, I have applied only two models to examine both the timing and selection ability of conventional and Islamic Pakistani equity funds. For future possibilities, the study suggests adopting several methods and approaches like the TMFF3 model and HM-FF3 model, making the study more comprehensive and accurate than this research.

Ability parity model for optimal fund allocation: Evidence from China's mutual fund markets

We propose in this article a novel ability parity model for optimal fund allocation. Compared with the traditional portfolio selection methods which directly work on asset returns and/or risk (volatility), the proposed ability parity method focuses mainly on the allocation between the stock selection ability and market timing ability of fund managers, which essentially determines fund performance (Fama, 1972). Using the data of China's mutual fund markets, we find strong and robust evidence that the proposed ability parity model delivers significantly higher return, skewness, and Sharpe ratio than traditional models and the benchmark index, while having volatilities comparable with traditional models.