What Style Liquidity Timing Skills Do Mutual Fund Managers Possess?. Issue 4 (8th October 2017)

• Record Type: Journal Article
• Authors: Bazgour, Tarik; Bodson, Laurent; Sougné, Danielle
• Is Part Of: Financial review. Volume 52:Issue 4(2017)
• Page Start: 597
• Page End: 626
• Publication Date: 2017-10-08
• Subjects: mutual funds -- aggregate market liquidity -- timing skills -- G11 -- G23; Finance -- United States -- Periodicals; Finance -- Periodicals; 332
• DOI: 10.1111/fire.12117
• Languages: English
• ISSNs: 0732-8516

Abstract

Abstract: Recent studies claim that mutual fund managers demonstrate strong MARKET liquidity timing skills. We extend their liquidity timing tests to the four‐factor case and investigate liquidity timing skills with respect to the MARKET, SIZE, VALUE and MOMENTUM factors. Contrary to these claims, we find no evidence that fund managers adjust market exposure in anticipation of market liquidity changes. We find rather strong evidence that fund managers successfully overweight small stocks as market liquidity increases. Our study also demonstrates that it is easy to misidentify SIZE liquidity timing as MARKET liquidity timing in models that focus only on MARKET liquidity timing.