New model to detect tendency timing ability of mutual fund managers

Abstract

We present some shortcomings about the traditional models evaluating the timing ability of mutual fund managers and propose a new model to evaluate the mutual fund managers' timing ability to tendancy change. Using this model and net asset value data, we can perceive whether the mutual fund managers can predict the future moving direction of the market when it experiences a significant tendancy change. Monte Carlo simulations indicate that our model does fulfill its task while other traditional models such as Treynor_Mazuy model and Henrikson-Merton model fail. Applying our approach to empirical study of the Chinese mutual funds, we get some interesting facts about the Chinese mutual fund managers.