QUESTION 5

We can test the market-timing ability of a mutual fund manager by running the following regression model:

Ri rf = a + b (Rm-Rf) + c (Rm-Rf)² where Ri is the funds monthly net of expense ratio monthly returns.

The regression output is the following:

	Coefficients	t Stat
a	0.08%	1.25
b	0.74	2.13
c	0.42	3.88

a) First, discuss briefly (in a couple sentences) about the definition of market timing. (5 pts)

b) Given the regression output above, do you think this manager is able to time the market? Why?