Style timing abilities: Evidence for pension fund managers from Spain and United Kingdom

The main aim of this paper is to analyze if pension funds managers are able to implement style timing strategies, one topic very important for an efficient management of an investment portfolio. Besides it is analyzed the stock-picking abilities of these managers. To this end, conditional and multifactorial versions of the market timing models of Treynor & Mazuy and of Merton & Henriksson are implemented for a pension fund sample from Spain and United Kingdom. The results obtained are very similar in both markets and indicate that both, the British and Spanish pension funds managers in our sample, show stock-picking ability and are able to time the book-to-market style. However the results indicate a perverse timing ability with regards to size and momentum styles.