High Quality Bond Funds: Market Timing Ability and Performance

Evaluating Bond Fund Sector Timing Skill

“…Two of the first studies to examine the timing ability of bond funds both infer skill from the fund's return series. Chen, Ferson, and Peters (2005) use a variation of the Treynor Mazuy quadratic approach while Comer, Boney, and Kelly (2005) combine the use of Sharpe (1992) style analysis with the Henriksson and Merton methodology. 2 Thus, the goal of this study is to use simulation procedures to focus on the ability of the Treynor Mazuy quadratic regression approach to identify timing skill when managers engage in timing across multiple bond sectors.…”

Style analysis and dominant index timing: an application to Australian multi-sector managed funds

“…Comer et al (2005) propose the usage of style analysis to determine each funds' dominant style index, thereby representing an alternative method of determining a funds' ability to engage in timing activity. Specifically, the mean style weights (w i1 .…”

“…w in ) arising from the single window style analysis are examined for each fund to determine the 'dominant' index. Following Comer et al (2005), those months where the return on the dominant index is greater/less than all other style indices are identified as M H / M L . For funds that demonstrate the ability to 'time' their dominant index, the authors expect to find a greater style weighting for the set of months M H than for the set of months M L .…”

“…In this article, we conduct an analysis in which timing is assessed relative to the 'dominant' style index. Specifically, as an alternative measure of timing ability, we investigate funds' ability to time their dominant style index using style analysis to identify the prevailing style of each fund (Comer et al, 2005). If a fund's returns can be largely explained by the return on that passive index, then a fund that varies the 'implied' weight of that dominant index appropriately can be identified as engaging in successful market timing.…”

On the timing of managed funds’ industry exposure

“…The results are similar to previous findings for equity funds, which indicate a concave relation between fund and benchmark returns, indicating "negative" timing skill. Strong evidence of perverse timing between bonds and cash is linked to high expense ratios by Comer, Boney and Kelly (2005).…”