New Test Statistics for Market Timing with Application to Emerging markets

We provide a new framework for identifying timing. Our analysis focuses on the smoothed joint history of the fund with the benchmark. The approach is fully non-parametric. Therefore, it has the advantage of avoiding the misspecification problems so common in this literature. The test statistic is some rank preserving function of a second order U-process. This empirical process allows us to define a set of statistics for market timing. We state the relevant asymptotic distribution. Some of these statistics are used to study the timing component of emerging markets funds using the dataset of Hwang and Satchell (1999).