Measuring the Timing Ability and Performance of Bond Mutual Funds
Measuring the Timing Ability and Performance of Bond Mutual Funds
So, how can we explain the superior performance of strategies that account for predictable manager skills? The answer lies in examining inter- and intraindustry asset allocation effects. Specifically, we compute, for each investment month and for each strategy considered, industry-level and industry-adjusted returns.We demonstrate that, for a strategy that incorporates manager skill predictability, these industry-level returns are 2–4%/year higher than those of a passive strategy that merely hold