Investor’s hindsight effect and true timing ability of tax saving mutual funds

Abstract

This paper analyze the cash flow timing ability of mutual fund investors both non-tax-saving and tax-saving funds which have constraints such as lock-up period to block investor’s ability to make cash flow timing, after controlling for the hindsight effect. We analyze the sample of Thai mutual funds in the period of 2006-2017.

We find that investors have bad timing ability and make return underperformance. The tax-saving funds that have investment constraints to block investor’s timing ability have better timing ability and tends to have smart money effect and make return over performance. In addition, volatility affect investors to increase the return under or over performance based on investors have smart or dump money effects. Lastly, large asset under management affects investors are hard to make cash flow timing.