Jensen's Alpha and the Market Timing Puzzle

Beitrag in einer Fachzeitschrift


Details zur Publikation

Autorinnen und Autoren: Bunnenberg S, Rohleder M, Scholz H, Wilkens M
Zeitschrift: Review of Financial Economics
Jahr der Veröffentlichung: 2019
Band: 37
Heftnummer: 2
Seitenbereich: 234-255
ISSN: 1058-3300
Sprache: Englisch


Abstract

Theory predicts that market timing in managed portfolios biases
Jensen’s alpha. However, empirical studies have failed to find evidence
this bias actually exists. We tackle this puzzle by showing via a nested
model approach and various simulations that, for the bias to become
economically relevant, its components, the extent of timing activity and
market conditions, must be extreme. Empirically, however, such
conditions rarely occur, explaining why the bias does not appear in the
data. In a comprehensive empirical analysis of US mutual funds, we find
that measures of total performance that allow for timing activities are
virtually identical to Jensen’s alpha. Hence, the key takeaway of this
paper is that Jensen’s alpha is a sufficient measure of total
performance, even in the presence of timing.


FAU-Autorinnen und Autoren / FAU-Herausgeberinnen und Herausgeber

Scholz, Hendrik Prof. Dr.
Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken


Einrichtungen weiterer Autorinnen und Autoren

Gottfried Wilhelm Leibniz Universität Hannover
Universität Augsburg


Zitierweisen

APA:
Bunnenberg, S., Rohleder, M., Scholz, H., & Wilkens, M. (2019). Jensen's Alpha and the Market Timing Puzzle. Review of Financial Economics, 37(2), 234-255.

MLA:
Bunnenberg, Sebastian, et al. "Jensen's Alpha and the Market Timing Puzzle." Review of Financial Economics 37.2 (2019): 234-255.

BibTeX: 

Zuletzt aktualisiert 2019-10-04 um 14:38