Fernando Muñoz

Stock-picking and style-timing abilities: a comparative analysis of conventional and socially responsible mutual funds in the US market

This paper analyses stock-picking and style-timing abilities through comparative analysis of an extensive sample of conventional and socially responsible (SR) mutual funds in the US market. Our results show that there is a little difference between conventional and SR fund managers, and even less so when we control for the presence of atypical observations. Both types of manager show negative stock-picking skills, correct size and book-to-market style-timing skills, and an absence of ability to time the market as a whole and the momentum style. Other notable findings are that the size of the fund does not affect the style-timing abilities of both conventional and SR mutual fund managers. In terms of the age of the fund, we observe that the results obtained for conventional funds are driven by older funds, while younger funds, both conventional and SR mutual funds, show perverse market-timing skills. Finally, we observe that both conventional and SR mutual fund managers make use of superior information to time the book-to-market style.

Do pension funds managers display stock-picking and market timing ability? Evidence from the United Kingdom and Spain

ABSTRACT This paper examines the stock-picking and market timing abilities of pension funds managers in the UK and Spanish markets, analysing their use of privileged information to implement management strategies and considering the possible effects of portfolio size. We take the analysis further by correcting benchmark omission bias. Our results reveal some degree of stock-picking ability, but perverse market timing ability, as well as incorrect use of privileged information in timing strategies. These findings are consistent with the portfolio size effect, although they are influenced by benchmark omission bias. The results obtained are very similar for both UK and Spanish pensions funds managers.

Searching for the most profitable and sustainable investment strategy: evidence from sovereign bond funds

The aim of this study is to provide the sovereign bond fund investor with a guide to finding the most profitable and sustainable investment strategy. For this purpose, a Global Sustainable Competitiveness Index is applied to a sample of 48 funds.We have conducted a best-in-class analysis, and our evidence supports the idea that the best strategy consists of investing in funds representing high GDP-per-capita countries, and registering the best-in-class sustainable performance scores.Additionally, other useful findings are that the screening of the funds is beneficial with respect to sustainable performance, and that there is no strong relationship between sustainability and GDP per capita.

Are traditional timing models well specified

Traditional timing models are affected by several biases, which generate spurious timing and stock-picking coefficients. Academics have appointed different causes as the possible sources of these biases. A negative correlation between timing and stock-picking abilities arises as a consequence of the biases in traditional timing models. This article provides evidence for one bias commonly found in traditional timing models, which is related with options. We focus on this bias in view of the scant attention it has so far received in the literature. We believe one possible cause for this bias is the failure to include the cost of the option implicit in timing activities in the timing models, and on this basis, we opt for a corrected version of the Merton and Henriksson model (1981). This study therefore is a pioneer in the assessment of the magnitude of this bias and in the measurement of the impact of its correction on fund managers’ results. Our results confirm both the existence of the bias and the correction of the problem when the cost of the option is included in timing models. The modified version of the Merton and Henriksson model, unlike the traditional model, reports positive timing and stock-picking coefficients, supporting the good performance by managers.

Correcting the Merton and Henriksson timing model

This article provides evidence of a common bias found in traditional timing models, which is related with a negative correlation between timing and stock-picking abilities resulting in spurious coefficients. We consider as a possible cause for this bias the failure to include in the timing models the cost of the option implied in timing activities, and on this basis we opt for a corrected version of the Merton and Henrikssons model (1981). As far as we know, this correction has not previously been applied. Our results confirm both the existence of this bias and the correction of the problem when the cost of the option is included in timing models.

Determinants of contract duration in outsourced services in the defense sector

ABSTRACT In this article we analyze the contract duration using Transaction Cost Theory with a sample of 283 outsourced services in the Spanish Army during the period 2009–2014.The analysis results show that the greater the specificity of the service, the greater the duration of the contract. In addition, it is obtained that the greater the uncertainty about the behaviour of the provider, the lower the duration of the agreement. These results are consistent with existing literature and empirical works. However, in the case of external uncertainty and incompleteness of the contract, they do not affect the contract duration. This may be because less complex services for shorter terms can be specified better and are less affected by external circumstances. Therefore, the uncertainty should be decomposed and analyzed according to their sources.