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The Performance of Market‐Timing Strategies of Italian Mutual Fund Investors

In this paper we show that simple buy-and-hold strategies beat the market-timing strategies effectively used by Italian investors in equity mutual funds. Therefore, investors should re-consider their investment behavior and choose cheaper, in terms of fees, and simpler, passive strategies. We estimate returns from market-timing strategies using aggregate data on a large sample of equity mutual funds' net flows and consider funds investing either in Europe and the euro area, or the US, or emerging markets. In all cases, buy-and-hold wins with extra returns that go from 0.24% per quarter (Europe and euro area) to 0.87% per quarter (US market). We also show that the differences in the performance of the two strategies are not explained by differences in risk and risk exposure.