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Stock Selection and Timing Ability of the Taiwan Equity Funds—The Application of Stochastic Beta, GARCH, and Nonlinear GLS

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ABSTRACT
This study simultaneously examines funds’ selectivity, beta stationary, and timing decisions by the modified method of Chen and Stockum (1986). We adopt GARCH, generalized least square (GLS), and a nonlinear parameter-estimator model to increase the estimate efficiency. The results indicate that up to 86% of the funds have stochastic betas, over 99% show positive but insignificant selectivity, and 83% indicate negatively significant market-timing ability. This suggests that Taiwan domestic-equity fund managers, on average, do not have stock selectivity and timing ability, which seems to support the efficient market hypothesis.
 
Cite this paper
Goo, Y. , Chang, F. and Chiu, K. (2015) Stock Selection and Timing Ability of the Taiwan Equity Funds—The Application of Stochastic Beta, GARCH, and Nonlinear GLS. Modern Economy, 6, 153-164. doi: 10.4236/me.2015.62013.
 
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