We analyze why traditional returns-based tests of market timing ability suggest in many cases that mutual fund managers evidence a negative market timing ability. The explanation is based on asymmetric correlations of stocks, which establishes that correlations are stronger in bear markets than...

We analyze whether the idiosyncratic risk puzzle noted by Ang et al. (2006, 2009) can be explained by the existence of market participants with different investment horizons. We adopt a wavelet multiresolution analysis to decompose returns distribution for different time scales. Our approach...