Abstract

I investigate the performance of Canadian REIT mutual funds over the period March 24, 2006 through March 5, 2012, focusing on their timing skills. Firstly, using standard, conditional and modified Value at Risk measures, I investigate the risk-adjusted-performance of the universe of 18 Canadian REIT mutual funds, as well as that of an equal weighted portfolio of these funds. In my analysis, I investigate the performance of the funds over different stages of a business cycle, as identified by recession indicators developed and made available by the Organization of Economic Development. Secondly, I extend Treynor and Mazuy’s model using Markov regime switching, to examine the market timing ability of Canadian REIT mutual fund managers and further determine if their timing ability can explain the variation in performance of REIT mutual funds over the business cycle. The results indicate that Canadian REIT mutual funds have positive risk-adjusted performance in recession periods and negative performance in bull markets. In addition, using the regime switching Treynor and Mazuy’s model, I find that fund managers exhibit negative market timing skills, particularly in a falling market.