Discussion paper

DP10639 Downside Risk Timing by Mutual Funds

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.


Simonov, A and A Bodnaruk (2015), ‘DP10639 Downside Risk Timing by Mutual Funds‘, CEPR Discussion Paper No. 10639. CEPR Press, Paris & London. https://cepr.org/publications/dp10639