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Discussion Paper Details

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Title: Downside Risk Timing by Mutual Funds

Author(s): Andriy Bodnaruk, Bekhan Chokaev and Andrei Simonov

Publication Date: May 2015

Keyword(s): downside risk, market timing and mutual funds

Programme Area(s): Financial Economics

Abstract: We study whether mutual funds systematically manage downside risk of their portfolios in ways that improve their performance. We find that actively managed mutual funds on average possess positive downside risk timing ability. Funds investing in large-cap and value stocks have stronger downside risk timing skills. Managers adjust funds? downside risk exposure in response to macroeconomic information. The economic value of downside risk timing is comparable to that of market timing.

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Bibliographic Reference

Bodnaruk, A, Chokaev, B and Simonov, A. 2015. 'Downside Risk Timing by Mutual Funds'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10639