Market Timing Performance in the Korean Fund Market: Evidence from Portfolio Holdings

This paper investigates whether Korean fund managers possess market-timing ability by considering portfolio holdings. Early studies employing return-based timing measures typically provided evidence of limited or no market-timing ability for mutual fund managers in the U.S., the U.K., Australia, among others. On the contrary, recent studies that employ measures based on portfolio holdings, most notably Jiang et al. (2007), have suggested that U.S. mutual fund managers have such ability. In line with this result, we test this evidence in Korean fund market. We think that this is the first study to provide an in-depth analysis of the performance of Korean fund managers by considering a comprehensive sample of fund holdings and using tests based on fund holdings and those based on returns, as in Jiang et al. (2007). Our empirical results indicate that on average, active managers of equity funds have a positive market-timing ability for long forecast horizons These results are consistent with the findings of Jiang et al. (2007). The implications of these empirical results suggest that Korean fund managers utilize market timing to enhance the performance of their actively managed equity funds. (C) 2013 The Authors. Published by Elsevier B.V.