Correspondence: Laurens Swinkels, Erasmus School of Economics, Rotterdam, The Netherlands. E-mail: lswinkels@few.eur.nl

¹is Assistant Professor in Finance at the Erasmus School of Economics in Rotterdam and affiliated with the Erasmus Research Institute of Management. He is also a Senior Researcher at Robeco's Quantitative Strategies Department.

²is pursuing his Master's Degree in Financial Economics at the Erasmus School of Economics in Rotterdam.

Received 29 March 2007; Revised 29 March 2007.

Abstract

We investigate the ability of mutual fund managers to successfully rotate between investment styles based on characteristics such as market capitalisation, valuation ratios, and price momentum. We find evidence in favour of market timing among a group of 153 US-based mutual funds with a Morningstar Midcap/Blend investments style. We also find evidence in favour of mutual funds being able to predict the direction of the valuation and momentum style returns, but not their magnitude. Our results indicate that the mutual funds in our sample were not able to rotate successfully between stocks with small and large market capitalisation.