Do mutual fund managers time market liquidity?

Research output: Contribution to journalArticle

25 Scopus citations

Abstract

This paper examines mutual fund managers' ability to time market-wide liquidity. Using the CRSP mutual fund database, we find strong evidence that over the 1974-2009 period, mutual fund managers demonstrate the ability to time market liquidity at both the portfolio level and the individual fund level. Liquidity timing predicts future fund performance and the difference in the risk-adjusted returns between top and bottom liquidity-timing funds is approximately 2% per year. Funds exhibiting liquidity-timing ability tend to have longer histories, higher expense ratios, and higher turnover rates.

Original languageEnglish (US)
Pages (from-to)279-307
Number of pages29
JournalJournal of Financial Markets
Volume16
Issue number2
DOIs
StatePublished - May 1 2013

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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