Essays on fund performance and timing ability

The dissertation is composed of three essays that examine fund performance and market timing ability. In the first essay, I examine the market timing ability of asset allocation and balanced mutual funds. I develop new multi-index models designed to measure the timing ability of funds that hold multiple categories of stocks and bonds. My models find greater timing ability among asset allocation mutual funds and less timing ability among balanced mutual funds than has been found by recent studies in the finance literature. The second essay examines the ability of the traditional single index models and the multi-index timing models I developed to accurately detect timing ability when a manager is timing across multiple asset classes. I find that the multi-index models are significantly more powerful than the traditional single index models and that the multi-index models are effective at detecting timing ability for a wide range of skill levels and real world allocation strategies. The third essay is coauthored with Edwin Elton, Martin Gruber, and Kai Li. We examine the characteristics and performance of an exchange traded index fund known by the name of Spiders. We find that Spiders underperform both the S&P index traditional index mutual funds due to how they are structured.