Study of Security Selection and Market Timing Abilities in Mutual Funds in Iranian Capital Market

Abstract

This study is an attempt to apply the market timing andsecurity selection models to evaluate the performance of Iranianmutual funds. The research shed light on the questions of ‘howsuccessful are mutual funds in earning excess returns over those of themarket?’ ‘Do the excess returns during research period have anymeaningful trend for these financial intermediaries or is it the result ofthe ability for active management of portfolio?’ To answer thesequestions, a sample of 8 mutual funds were chosen to investigate theability for active management, including market timing & securityselection, based on Treynor-Mazuy & Henriksson –Merton model.The results indicated that there is no statistically significant markettiming ability in any of these cases, and positive security selection isonly observed in two mutual funds.

Keywords

• active management
• market timing ability
• mutual fund
• performance evaluation
• security selection ability