Market timing and an investment fund efficiency analysis in Poland

Grzegorz P. Mentel ,  Beata Szetela 

Rzeszów University of Technology, Dept of Quantitative Methods in Economy (ZMIWE), al. Powstańców Warszawy 8, Rzeszów 35-959, Poland

Abstract

The current global crisis has strongly affected financial markets. After many bullish years and realization of above average profits the investors were forced to face the new, demanding reality, where the proper timing and effectiveness become one of the most desirable qualities. The complexity of the investment decision making process requires highly skilled managers, who are able to realize the investment strategy, which will correspond in the same time with the individual investors and fund owners expectations and preferences and despite the hard time they will manage to achieve gains more often than losses. This paper investigates the competency of the investment fund managers to anticipate market changes in micro and macro scale in the context of market timing. For this purpose two models: Henriksson-Merton and  Treynor –Mazuy were applied. The Henriksson-Merton Model tests the hypothesis if the investment fund managers have the ability to anticipate changes on the financial market on a timely manner and to adjust the proportion of individual stocks in the investment fund portfolio accordingly (micro scale). The Treynor –Mazuy Model investigates whether  the managers are able to foresee the overall market changes and fluctuations (macro level), what points at their investment and management skills. The analysis was based on a data for the bond, money, financial markets and hybrid funds in Poland for the years 2000-2015. We have analyzed and compared the data before and after the current crisis, to test if the crisis has affected in any way managers market timing abilities. The results have shown that the investment fund managers were able to predict the future market behavior only to the limited extend. What is more they have difficulties with the asset selection and allocation. This state of affairs can be explained either by a poor preparation and insufficient experience of executives or by unexpected changes of the market behavior which could not be predicted on the basis of the well-known market fundamentals. 

Presentation: Oral at Current Economic and Social Topics 2015, by Beata Szetela
See On-line Journal of Current Economic and Social Topics 2015

Submitted: 2015-11-30 18:16
Revised:   2015-12-01 16:30
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