Stock Selection, Market Timing and Morningstar Rating System
Post by MSF Chula at Sunday, 10 January 2021 05:47 PM

This paper examines whether higher star rating funds rated by Morningstar rating system significantly outperform lower star rating funds and further investigate whether the better performance comes from stock selection or market timing skills by using data of Thai equity mutual funds from January 2009 to December 2018. The results show that the higher Morningstar rating is associated with higher returns and the better performance of five-star rating funds reflects superior stock selection skill rather than market timing ability, whilst the three lowest-rated categories of funds are characterized by good market timer but bad stock picker. Moreover, I examine whether these managerial skills persist in the following year. The persistent test results show that one-star, two-star and three-star rating funds have hot hand phenomenon in market timing and cold hand phenomenon in stock picking while there is no persistence on stock selection skill of five-star rating funds.

Last updated at Sunday, 10 January 2021 05:47 PM