Venessa S. Tchamyou, Simplice A. Asongu and Jacinta C. Nwachukwu
The purpose of this paper is to investigate the effects of information asymmetry (between the realized return and the expected return) on market timing in the mutual fund industry.
Abstract
Purpose
The purpose of this paper is to investigate the effects of information asymmetry (between the realized return and the expected return) on market timing in the mutual fund industry.
Design/methodology/approach
For the purpose, the authors use a panel of 1,488 active open-end mutual funds for the period 2004-2013. The authors use fund-specific time-dynamic betas. The information asymmetry is measured as the standard deviation of idiosyncratic risk. The data set is decomposed into five market fundamentals in order to emphasis the policy implications of the findings with respect to: equity, fixed income, allocation, alternative, and tax-preferred mutual funds. The empirical evidence is based on endogeneity-robust difference and system generalized method of moments.
Findings
The following findings are established. First, the information asymmetry broadly follows the same trend as volatility, with a higher sensitivity to market risk exposure. Second, fund managers tend to raise (cutback) their risk exposure in time of high (low) market liquidity. Third, there is evidence of convergence in equity funds. The authors may, therefore, infer that equity funds with lower market risk exposure are catching-up with their counterparts with higher exposure to fluctuation in market conditions.
Originality/value
The paper complements the sparse literature on market timing in the mutual fund industry with time-dynamic betas, information asymmetry and an endogeneity-robust empirical approach.
Details
Keywords
Simplice Asongu, Ibrahim Raheem and Venessa Tchamyou
Financial dollarisation in sub-Saharan Africa (SSA) is most persistent compared to other regions of the world. The purpose of this paper is to complement the existing scant…
Abstract
Purpose
Financial dollarisation in sub-Saharan Africa (SSA) is most persistent compared to other regions of the world. The purpose of this paper is to complement the existing scant literature on dollarisation in Africa by assessing the role of information sharing offices (public credit registries and private credit bureaus) on financial dollarisation in 25 SSA countries for the period 2001-2012.
Design/methodology/approach
The empirical evidence is based on ordinary least squares and generalised method of moments (GMM).
Findings
The findings show that information sharing offices (which are designed to reduce information asymmetry) in the banking industry are a deterrent to dollarisation. The underpinning assumption that financial development reduces financial dollarisation is confirmed.
Originality/value
There is scant literature on the relevance of information sharing offices in development outcomes in Africa. While the establishment of these offices in most countries in the continent began in 2004, scholarship on the importance of these offices in financial development is sparse.