Purpose: This study aims to examine whether mutual funds can earn daily alpha and time daily market return. Design/methodology/approach: Based on the Treynor and Mazuy (1966) model and the Henriksson and Merton (1981) model, the author tests the daily market-timing ability of actual mutual funds and bootstrapped mutual funds. Findings: The author finds that daily alpha and daily market-timing ability can come from pure luck. In addition, the relation between fund alpha and market-timing ability is at best minimal. Originality/value: Using bootstrapped funds as the benchmark, this study shows that daily fund market is overall efficient.
All Science Journal Classification (ASJC) codes
- Economics, Econometrics and Finance(all)