Market timing, selectivity and alpha generation

Evidence from Australian equity superannuation funds

Michael E. Drew, Madhu Veeraraghavan, Vanessa Wilson

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

In this performance evaluation study, two questions are addressed. First, do active fund managers possess macro and micro forecasting skills that deliver superior risk-adjusted returns? Second, what is the nature of market timing/stock selectivity trade off in the generation of alpha? The answers from this study are as follows: as an industry, managers delivered inferior returns for superannuation investors for the period 1991 through 2000. The study provides little evidence that the Australian funds management industry holds sufficient macro and/or micro forecasting abilities to generate positive alpha. While previous research has found that inferior market timing decisions are compensated for by superior stock selection skills, this study finds no substantive inverse relationship between timing and selectivity.

Original languageEnglish
Pages (from-to)111-127
Number of pages17
JournalInvestment Management and Financial Innovations
Volume2
Issue number2
Publication statusPublished - 2005

Keywords

  • Australia
  • Superannuation funds

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