What Style-Timing Skills do Mutual Fund “Stars†Possess?

Kosowski, Timmermann, Wermers, and White (2006) find that certain growth-oriented fund managers have substantial skill but do not stipulate the particular skills that they possess. We examine in detail the style-timing abilities of 3,181 US growth-oriented equity mutual funds over the period from 1993 to 2006. We find that an important contributor to the persistent abnormal returns reported by Kosowski et al. (2006) is growth timing, i.e. switching stocks along the value/growth continuum, and that this explains at least 45% of the abnormal returns reported. No other style-timing skills are observed. Our results also demonstrate that it is easy to misidentify growth timing as market timing.