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A Study of Investment Style Timing of Mutual Funds in India

Author

Listed:
  • S. Pavithra

    (Madras School of Economics (MSE), Behind Government Data Centre)

  • Parthajit Kayal

    (Madras School of Economics (MSE), Behind Government Data Centre)

Abstract

We investigate the market return timing ability of fund managers of actively managed Indian mutual funds of various categories (small-cap, mid-cap, large-cap, and multi-cap funds) for the period of 2014 to 2019. To assess the exposure of different investment factors like market, value, momentum, and size, we use the 4-factor model. Further, we use the Treynor Mazuy and Henriksson Merton models, to study the timing ability of the magnitude and direction of the style, respectively. We observe that value investing has the least style timing, followed by momentum. The extent of size timing is highest, but the direction timing is least in small-cap. Mid-cap funds place second in size factor timing. The market timing factor shows best results for multi and large-cap funds while showing moderately better results for the other two compared to the value factor. Our findings add another dimension to mutual fund performance evaluation and provide a better understanding of the investment style suitable for different funds. These findings could help fund managers in returns maximisation returns by using the right style.

Suggested Citation

  • S. Pavithra & Parthajit Kayal, 2023. "A Study of Investment Style Timing of Mutual Funds in India," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 49-72, March.
    • Handle: RePEc:kap:apfinm:v:30:y:2023:i:1:d:10.1007_s10690-022-09368-6
    DOI: 10.1007/s10690-022-09368-6
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    More about this item

    Keywords

    Prediction; Asset management; Fund house; Ability; Value; Growth;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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