Do pension funds managers display stock-picking and market timing ability? Evidence from the United Kingdom and Spain

• Published in: Revista española de financiación y contabilidad Vol. 39; no. 146; pp. 349 - 365
• Main Authors: Alda, Mercedes, Ferruz, Luis, Muñoz, Fernando
• Format: Journal Article
• Language: English
• Published: Routledge 2010; Asociación Española de Contabilidad y Administración de Empresas, AECA
• Subjects: Benchmark Omission; Efecto tamaño; Fondos de pensiones; Market Timing; Omisión de Índices de Referencia; Pension Funds; Selección de valores; Sincronización con el Mercado; Size-Effect; Stock-Picking
• ISSN: 0210-2412; 2332-0753
• DOI: 10.1080/02102412.2010.10779685

This paper examines the stock-picking and market timing abilities of pension funds managers in the UK and Spanish markets, analysing their use of privileged information to implement management strategies and considering the possible effects of portfolio size. We take the analysis further by correcting benchmark omission bias. Our results reveal some degree of stock-picking ability, but perverse market timing ability, as well as incorrect use of privileged information in timing strategies. These findings are consistent with the portfolio size effect, although they are influenced by benchmark omission bias. The results obtained are very similar for both UK and Spanish pensions funds managers.