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Open Access research with a European policy impact...

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EPRC is a leading institute in Europe for comparative research on public policy, with a particular focus on regional development policies. Spanning 30 European countries, EPRC research programmes have a strong emphasis on applied research and knowledge exchange, including the provision of policy advice to EU institutions and national and sub-national government authorities throughout Europe.

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Conditional performance in different states of the economy: evidence from U.K. unit trusts

Ntozi-Obwale, Patricia and Fletcher, Jonathan and Power, David (2009) Conditional performance in different states of the economy: evidence from U.K. unit trusts. Journal of Financial Transformation, 24. pp. 155-161. ISSN 1755-361X

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Abstract

The purpose of this paper is to test if U.K. unit trust managers exhibit security selection and market timing skills. In other words, can they identify underpriced securities or time the market according to whether the economy is expanding or contracting. Specifically, the security selection and timing abilities is allowed to vary throughout the sample period as different economic conditions arise. The evidence shows that there is some evidence of timing skill particularly among managers of growth & income trusts when the dividend yield levels are either relatively low or relatively high. Also, managers of balanced trusts display some evidence of market timing when interest rates are relatively high. There is very little support for the view that the security selection skills of U.K. unit trust managers contribute to fund performance.