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Objective: This research is designed to propose empirical evidence on factors affecting stock selection ability and market timing ability.
Theoretical framework: Recent research found that most equity mutual funds underperform the market return due to a lack of stock selection and market timing abilities. However, rarely do they propose evidence of factors affecting the existence of these abilities Method: There are two-panel regression models developed in this research to show evidence of factors affecting stock selection and market timing abilities. The Dumitrescu–Hurlin (DH) test is used to gain a comprehensive understanding of the causality relationship between the variables Results and Conclusion: Based on observation of three ASEAN countries, this research proposes empirical evidence that the growth of fund size, volatility of the fund’s net asset value (NAV), and performance indicators of the underlying assets affect the stock selection ability differently in the respective countries. Similarly, the growth of fund size, volatility of the fund’s NAV, and macroeconomic indicators also affect the market timing ability differently Implications of the research: Therefore, the implementation of investment strategies in the three observed markets considers factors affecting the existence of the two abilities, effectively generating outperforming returns.
Originality/value: Recent studies focused more on whether equity mutual funds are managed with stock selection and market timing abilities but not on factors affecting those abilities. This research proposes empirical evidence on factors affecting those abilities in different markets through econometrics analyses on panel data and the Dumitrescu–Hurlincausality test.
