The Treynor-Mazuy Conditional Model: Overview of Market Timing and Stock Selection on Equity Mutual Funds Performance

This study explores market timing and stock selection by investment managers during the Covid-19 in Indonesia. By applying several sample criteria to the population of mutual funds registered at OJK, we found 55 stock mutual funds using the purposive sampling. We processed data using the STATA16 computer program. The Treynor-Mazuy conditional inflation and exchange rate model, according to the findings of this study, can show that market timing and stock selection for mutual fund managers have a positive and significant impact on improving the performance of equity fund portfolios during the pandemic in Indonesia. In Indonesia, there are 5 equities mutual funds having positive or market timing skills, accounting for 9.09 percent of all equity mutual funds, whereas the remaining 90.91 percent do not. The positive coefficient of the gamma variable shows that the investment manager’s ability to market time is expected to result in higher stock mutual fund returns. Positive or stock selectivity characteristics are available in 45 equity mutual funds, or 81.18 percent. The contribution of this study focuses on exchange rate and inflation. However, there needs to be a relevant follow-up comparison before the pandemic occurs. In addition, it is necessary to consider other elements in the macro-economy. © 2022, University of National and World Economy. All rights reserved.

Islamic equity funds and stock market: dynamic relation and market timing during the COVID-19 outbreak

Purpose This paper aims to explore the impact of the COVID-19 pandemic on the market timing skills of Islamic equity funds in Asia, Europe and North America. Design/methodology/approach The authors employed a two-step process. First, a Granger causality test is applied to test the bivariate relationship between Islamic fund indices and stock market ones by highlighting the impact of the COVID-19 pandemic. Second, the methodology of Treynor and Mazuy (1966) is deployed to account for the market timing abilities skills of Islamic fund managers during the pandemic period. Findings The investigation revealed mixed results. The European Islamic funds were positively impacted by the stock market as well as by the COVID-19 pandemic context. Additionally, compared to their Asian and North American peers, only European Islamic fund managers have the ability to time the market during the health crisis period. Research limitations/implications Despite its contribution to the Islamic finance literature, this study has some flaws. Indeed, the selected sample of three regions, namely Asia, Europe and North America, precludes extrapolating these conclusions. Other regions should be investigated to further our understanding of Islamic equity funds. Furthermore, due to data availability and accessibility, the study period was limited to a specific time of the COVID-19 pandemic. This shortcoming can be addressed through a multiwave investigation, especially since each region was exposed differently to the pandemic. Practical implications The paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic fund managers across the three regions would serve as a guide to identifying the most suitable internationally focused investment strategy. Social implications The paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic funds managers across the three regions would serve as a guide to identify the most suitable internationally focused investment strategy. Originality/value The originality of this investigation is that it is the first to examine Islamic equity fund managers and their skills to time the stock markets during the COVID-19 pandemic period in Asia, Europe and North America. The current paper extends the Islamic finance literature.

Intraday return predictability in the cryptocurrency markets: momentum, reversal, or both

This paper reports evidence of intraday return predictability, consisting of both intraday momentum and reversal, in the cryptocurrency market. Using high-frequency price data on Bitcoin from March 3, 2013, to May 31, 2020, it shows that the patterns of intraday return predictability change in the presence of large intraday price jumps, FOMC announcement release, liquidity levels, and the outbreak of the COVID-19. Intraday return predictability is also found in other actively traded cryptocurrencies such as Ethereum, Litecoin, and Ripple. Further analysis shows that the timing strategy based on the intraday predictors produces higher economic value than the benchmark strategy such as the always-long or the buy-and-hold. Evidence of intraday momentum can be explained in light of the theory of late-informed investors, whereas evidence of intraday reversal, which is unique to the cryptocurrency market, can be related to investors’ overreaction to non-fundamental information and overconfidence bias.