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The Performance of Market‐Timing Strategies of Italian Mutual Fund Investors
Author(s) -
Borri Nicola,
Cagnazzo Alberto
Publication year - 2018
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/ecno.12093
Subject(s) - market timing , equity (law) , mutual fund , business , portfolio , quarter (canadian coin) , investment strategy , monetary economics , institutional investor , closed end fund , passive management , economics , financial economics , finance , corporate governance , market liquidity , archaeology , political science , law , history
In this paper, we show that simple buy‐and‐hold strategies over‐perform market‐timing strategies effectively used by Italian investors in equity mutual funds. We estimate returns from market‐timing strategies using aggregate data on net flows for a large sample of equity mutual funds, available to Italian investors, that buy stocks in the following markets: Europe and the euro area, the United States and Emerging markets. In all cases, buy‐and‐hold over‐performs market‐timing with extra returns that go from 0.24 per cent per quarter (Europe and euro area) to 0.87 per cent per quarter (US market). These differences are not explained by differences in risk and risk exposure. Investors should re‐consider their investment strategies and choose cheaper, in terms of fees and simpler, in terms of portfolio allocation, passive strategies.