MARKET TIMING ABILITIES OF LARGE-CAP EQUITY MUTUAL FUND MANAGERS: EVIDENCE FROM INDIA

Abstract

This study investigates the Market Timing Ability (MTA) of large-cap equity fund managers in India. The extensions of Treynor and Mazuy (TM) model and Hen- riksson and Merton (HM) model have been used by adding six additional factors rela- ted to the public information, 91-days Treasury bill’s yield, the dividend yield on CNX 500 index, term structure of interest rates, the price-to-earnings ratio, yield from fo- reign exchange rates changes, and growth rate in gold prices. The extended models are termed, conditional models. This study has used time-series data of large-cap equity funds. The results of the conditional and unconditional versions of TM and HM models reveal that the large-cap equity funds as a whole do not possess significant though a considerable percentage of the funds under each of the models show signifi- cant positive MTA. The study also highlights that the inclusion of the public information variables reconstitutes the impact of the market timing factor and other beta estima- tes in the model