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Sebastian Fischer
Former Member
Last Name
Fischer
First name
Sebastian
Phone
+41 71 224 7015
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Item type:Publication, Factor Exposure Variation and Mutual Fund PerformanceWe investigated the relationship between a mutual fund’s variation in factor exposures and its future performance. Using a dynamic state-space version of the Carhart (1997) four-factor model to capture factor variations, we found that funds with volatile factor exposures underperform funds with stable factor exposures by 147 bps a year. This underperformance is explained neither by volatile factor loadings of a fund’s equity holdings nor by a fund’s forced trading through investor flows. We conclude that fund managers voluntarily attempt to time factors but are unsuccessful at doing so.Type:forthcomingJournal:Financial Analysts JournalVolume:76Issue:4Scopus© Citations 3