Stock-selection timing

We argue that mutual fund managers should trade actively only when the market presents opportunities to pick stocks with positive alpha. In this paper, we propose stock-selection opportunity measures and show a significant portion of funds time their active trading, i.e., they more opportunities. timers outperform negative by about 82 bps in annualized four-factor alpha over subsequent six-month horizon and, importantly, timing contributes significantly performance even after controlling for managers’ stock-picking ability. Finally, present evidence on average very high portfolio turnover are actually poor timers, whereas younger larger family size exhibit better skills stock-selection.