The Performance and Market-Timing Skills of Consumer Discretionary Fund Managers

This study evaluates the selectivity skill and market-timing ability of fund managers who invest in consumer discretionary stocks over the 2010-2023 period. The nature of the consumer discretionary sector is unique. Since firms involved in this business segment offer non-essential goods and services, this sector is crowded by healthy and fierce competition. Therefore, it becomes essential to analyze fund managers to see whether they have the skills to select the right mix and generate superior returns. The study further examines the selectivity and market-timing skills at two sub-periods (2013-2020 and 2021-2023). This study uses the single-factor CAPM and 4-factor Carhart models to examine the selectivity skill of fund managers. Both the single-factor CAPM and the 4-factor Carhart models are expanded to the Treynor-Muzay (1966) model to estimate the market-timing skill and its implication on the alpha of sample funds. The findings of the study show insignificant positive to negative stock-picking skills and positive and significant market-timing skills of fund managers. Keywords Mutual Funds; Selectivity Skill, Market Timing