This paper aims to determine whether the size of a fund family influences investment strategy (stock picking or market timing) in the Spanish mutual fund market. This is a highly concentrated market, being controlled by two banks with a percentage of 46%. The impact of considering time-varying returns and risks on selectivity and market timing results is also assessed. Our results indicate that large management companies follow a market timing strategy, while small management companies are better at stock picking. These results are more obvious when conditional information is included. Additional tests are carried out to check the robustness of our results. We observe that the results obtained for large and small management companies are maintained when we control for fund size and when we introduce additional benchmarks into the timing model. However, when the time period is divided into two subperiods, the results are no longer robust. This may be connected to the evolution of returns in the Spanish market.
Review of Quantitative Finance and Accounting – Springer Journals
Published: Feb 4, 2009
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