Showing papers by "Wei Jiang published in 2001"

A Nonparametric Test of Market (Mis-) Timing

Abstract: In this paper we propose a nonparametric test for money managers' market timing ability and apply the analysis to a large sample of mutual funds that have different benchmark indices. The test (i) only requires the ex post returns of the funds and the benchmark portfolios; (ii) isolates timing from selectivity; (iii) separates the quality of timing information a money manager possesses from the aggressiveness with which she reacts to such information; and (iv) is robust to different information and incentive structures as well as underlying distributions. Theta - the parameter for timing ability - is on average below the neutral level (indexation) among actively managed domestic equity funds, and is very difficult to predict from observable fund characteristics. Overall, actively managed funds aiming at "timing the market" in general fall short of just "riding with the market."

The Effects of True and Perceived Ability on Analysts' Forecasting Behavior

Abstract: We model the existence of an equilibrium in which analysts adopt a threshold reporting strategy to convey their forecasting ability. Under this strategy, an analyst issues a forecast only if the realized value of her private signal exceeds a threshold value. Higher-ability analysts choose higher threshold levels than lower-ability analysts, and the market correctly interprets all analysts' forecasts. Our model produces implications for using sample mean squared forecast error to measure analysts' ability, offers alternative explanation for the observed bias in analysts' forecasts, and produces testable predictions concerning analysts' decisions to follow a firm and to issue forecasts for firms they follow.