Evaluation of mutual fund performance on Polish capital market with the use of market timing models

Performance analysis of mutual funds is a very important theoretical and practical issue. There is no consensus on the market, which methods of investment performance should be used. This study examines performance of Polish mutual funds between 2001 and 2013. The mutual fund data set contains returns of Polish equity funds having at least 80% of the fund capital invested in domestic equity. Regression based market timing models (e.g.: Treynor-Mazuy (1966), Henriksson-Merton (1981) and Connor-Korajczyk (1991)) are used to assess market timing and stock selection abilities of fund managers. The main purpose of the article is to compare different methods of evaluating fund abilities in the area of market timing and security selection. Estimated parameters of the models used in the research are statistically significant and the models are well fitted to data. However, it is often impossible to find evidence of any market timing ability in the selected group of funds. The results show that Polish mutual funds exhibit selectivity ability more often than timing ability. Most of them have negative timing. The results of the study may be important both for investors and fund managers.