Do Hybrid Fund of Funds Exhibit Market Timing Skills?

Welcome to MutualFunds.com. Please help us personalize your experience.

Select the one that best describes you

Your personalized experience is almost ready.

Join other Individual Investors receiving FREE personalized market updates and research. Join other Institutional Investors receiving FREE personalized market updates and research. Join other Financial Advisors receiving FREE personalized market updates and research.

Thank you!

Check your email and confirm your subscription to complete your personalized experience.

Thank you for your submission, we hope you enjoy your experience

Larry Swedroe headshot

Expert Analysis and Commentary

Do Hybrid Fund of Funds Exhibit Market Timing Skills?

Larry Swedroe Mar 23, 2015



Hybrid-Funds of Funds


FOFs often have similarly elastic mandates, which give both FOFs and HFOFs more investment flexibility than traditional equity and bond mutual funds. This allows them to alter their asset allocations in response to changing market conditions. As a result, they provide a good sample to test market-timing skills.


The Timing Ability of Hybrid Funds of Funds


Rodriguez found evidence of perverse market-timing skills in both FOFs and HFOFs. In the case of HFOFs, 75 percent of the sample exhibited negative timing skills, with about 25 percent of them being statistically significant at the 5 percent level. On the other hand, just 25 percent exhibited positive timing skills and just 5 percent of the total were statistically significant.

The results were similar for FOFs. The study found 64 percent of the sample showed negative market-timing coefficients, with about 11 percent being statistically significant at the 5 percent level.

While the statistical significance of Rodriguez’s results weren’t high, both the HFOF and FOF samples showed perverse timing ability. The evidence of perverse timing ability was stronger for HFOFs. The lesson for investors is: If even professionals fail to persistently add value through market-timing efforts, what are the odds that individual investors can do so?


The Bottom Line



Sign up for Advisor Access

Receive email updates about best performers, news, CE accredited webcasts and more.

Please Enter Your Email
Please Select Your Advisor Type

Popular Articles

Download Our Free Report

Why 30 trillion is invested in mutual funds book