Abstract
We examine the impact of style drift on the fund performance measures of selectivity and market timing. We find that style drift is positively related to selectivity performance, only when the market is in decline. Flow volatility is positively related to market timing ability during upmarket conditions. In addition, we find that larger funds are superior at stock selection, regardless of market conditions.
Notes
1Our lagged information variables are 30-day Treasury bill yields; average market dividend yield for the past 12 months; term structure of interest rates calculated as 10-year Treasury bond yield − 3-month Treasury bill yield and January/July dummies.