An Analysis of Selectivity and Market Timing Ability of Equity Mutual Fund in Thailand

Abstract

The equity mutual fund is crucially affected by volatility from the price change of securities invested. Therefore, mutual fund performance mainly depends on both security selectivity and market timing abilities. In this research, we focused on the analysis of the selectivity and market timing of equity mutual fund in Thailand. The set of sampling data came from 274 equity mutual funds, which reach out 5 years or more maturity date at the end of 2020. From January 2016 to December 2020, rate of return was measured by the change of the net asset value plus dividend. Moreover, the market index, the risk-fee return rate, and market systematic risk were measured through the SET TRI Index, 1-year treasury yield, and beta, respectively. Based on the work of Treynor & Mazuy (1966), we construct the statistical model, known by Panel Regression Data, in order to measure the selectivity and market timing abilities of the equity mutual fund is statistically significantly worse than that of the market index. However, the market timing ability of the fund gives better performance. The results were deeply investigated by fractioning into three-year time intervals as 2016-2018, 2017-2019, and 2018-2020. The second and third intervals draw the same conclusion as the overall five-year period, while the first interval shows the opposite remark. These may be caused by the situation differently. The Stock Exchange of Thailand has been in a downtrend during 2016-2017. In summary, the results suggest that in order to enhance the performance of equity mutual fund, the ability of selectivity should be improved efficiency of operation.