Selectivity and Market Timing Performance of Mutual Funds in Emerging Markets: An Evidence from India

Abstract

This study focuses on the performance of Indian equity mutual funds in terms of selectivity and market timing. A total of 1248 equity mutual funds are examined using the traditional Treynor and Mazuy (1966) and Henriksson and Merton (1981) models (in short TM Model and HM Model). We employed the generalized auto regressive conditional heteroscedasticity (GARCH) model introduced by Bollerslev (1986) in addition to these traditional models. With the exception of the TM Model, the remaining three models reveal that the fund managers exhibit superior stock selection abilities in a significant percentage of schemes. All four models, however, demonstrated that Indian mutual fund managers had poor market timing skills.