Conditional performance in different states of the economy: evidence from U.K. unit trusts

Ntozi-Obwale, Patricia, Fletcher, Jonathan and Power, David (2008) Conditional performance in different states of the economy: evidence from U.K. unit trusts. Journal of Financial Transformation, 24. pp. 153-159. ISSN 1755-361X

Abstract

The purpose of this paper is to test if U.K. unit trust managers exhibit security selection and market timing skills. In other words, can they identify underpriced securities or time the market
according to whether the economy is expanding or contracting. Specifically, the security selection and timing abilities is allowed to vary throughout the sample period as different economic conditions
arise. The evidence shows that there is some evidence of
timing skill particularly among managers of growth & income trusts when the dividend yield levels are either relatively low or relatively high. Also, managers of balanced trusts display some evidence of
market timing when interest rates are relatively high. There is very little support for the view that the security selection skills of U.K. unit trust managers contribute to fund performance

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