• Medientyp: E-Artikel
  • Titel: Jensen's alpha and the market‐timing puzzle
  • Beteiligte: Bunnenberg, Sebastian; Rohleder, Martin; Scholz, Hendrik; Wilkens, Marco
  • Erschienen: Wiley, 2019
  • Erschienen in: Review of Financial Economics, 37 (2019) 2, Seite 234-255
  • Sprache: Englisch
  • DOI: 10.1002/rfe.1033
  • ISSN: 1058-3300; 1873-5924
  • Schlagwörter: Economics and Econometrics ; Finance
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  • Beschreibung: <jats:title>Abstract</jats:title><jats:p>Theory predicts that market‐timing activities bias Jensen's alpha (<jats:styled-content style="fixed-case">JA</jats:styled-content>). However, empirical studies have failed to find consistent evidence of this bias. We tackle this puzzle in a nested model analysis and show that the bias contains an exogenous market component that is unrelated to market‐timing skill. In a comprehensive empirical analysis of <jats:styled-content style="fixed-case">US</jats:styled-content> mutual funds, we find that the timing‐induced bias in <jats:styled-content style="fixed-case">JA</jats:styled-content> is mainly driven by this market component, which is uncorrelated with measured timing activities. Measures of total performance that allow for timing activities are virtually identical to <jats:styled-content style="fixed-case">JA</jats:styled-content>, even if timing activities are present in the evaluated fund. Hence, we conclude that <jats:styled-content style="fixed-case">JA</jats:styled-content> is a sufficient measure of total performance.</jats:p>