Can Mutual Fund Managers Predict Security Prices to Beat the Market? The Case of Greece During the Debt Crisis

Journal of Prediction Markets, Vol 12, No 3. pp 40-62, DOI/10.5750/jpm.v12i3.1644, 2019

20 Pages Posted: 13 Mar 2019

See all articles by Drosos Koutsokostas

Drosos Koutsokostas

National and Kapodistrian University of Athens

Spyros Papathanasiou

National and Kapodistrian University of Athens

Nikolaos Eriotis

National and Kapodistrian University of Athens

Date Written: February 21, 2019

Abstract

The purpose of this paper is to examine the performance of Greek equity mutual funds, elaborating on stock selection in parallel with market timing measures, in comparison with the performance of ETFs and index funds for the period 01/24/2008-05/12/2017, and the short-term performance persistence of actively managed funds for the period 05/12/2015-05/12/2017. Using all domestic equity mutual funds at our disposal and daily data, the authors apply multi-factor models to estimate risk-adjusted returns and to evaluate the selectivity and market timing ability of fund managers. In order to investigate short-term performance persistence, the coexistence of stock selection and market timing strategy is allowed and a battery of parametric and nonparametric tests is implemented. Results show that actively managed mutual funds underperformed the market index, as well as passively managed ETFs and index funds, primarily due to the managers’ inability to time the market. Furthermore, a winner-picking strategy to outperform a-buy-the-market-and hold policy is questioned.

Keywords: portfolio evaluation, exchange-traded funds, selectivity, market timing ability, short-term performance persistence, market efficiency

JEL Classification: G11,G12,G14,G23

Suggested Citation

Koutsokostas, Drosos and Papathanasiou, Spyros and Eriotis, Nikolaos, Can Mutual Fund Managers Predict Security Prices to Beat the Market? The Case of Greece During the Debt Crisis (February 21, 2019). Journal of Prediction Markets, Vol 12, No 3. pp 40-62, DOI/10.5750/jpm.v12i3.1644, 2019, Available at SSRN: https://ssrn.com/abstract=3339276 or http://dx.doi.org/10.2139/ssrn.3339276

Drosos Koutsokostas

National and Kapodistrian University of Athens ( email )

5 Stadiou Strt
Athens, 12131
Greece
10679 (Fax)

Spyros Papathanasiou (Contact Author)

National and Kapodistrian University of Athens ( email )

1, Sofokleous Str.
Athens, 10559
Greece

Nikolaos Eriotis

National and Kapodistrian University of Athens ( email )

5 Stadiou Strt
Athens, 12131
Greece

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