Download or read book Skill and Persistence in Mutual Fund Returns written by Bradford D. Jordan and published by . This book was released on 2016 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: The addition of the Fama and French (2015) profitability (RMW) and investment (CMA) factors to the standard four-factor model reveals persistent positive alpha after fees for mutual funds. Over the period 2000-2014, about 65 percent of fund managers have at least some skill, and about 15 percent have skill in excess of fees. The best performing funds have significant negative exposures to both factors, while the worst performing funds have significant positive exposures. Because of that pattern, failure to account for these factors masks a difference in alpha between the best and worst performers of almost 7 percent per year.
Download or read book On Persistence in Mutual Fund Performance written by Mark M. Carhart and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a sample free of survivor bias, I demonstrate that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual funds' mean and risk-adjusted returns. Hendricks, Patel and Zeckhauser's (1993) quot;hot handsquot; result is mostly driven by the one-year momentum effect of Jegadeesh and Titman (1993), but individual funds do not earn higher returns from following the momentum strategy in stocks. The only significant persistence not explained is concentrated in strong underperformance by the worst-return mutual funds. The results do not support the existence of skilled or informed mutual fund portfolio managers.
Download or read book Persistence in Style Adjusted Mutual Fund Returns written by Melvyn Teo and published by . This book was released on 2013 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: The literature on mutual fund persistence took a hit with the finding that one-year stock momentum and expense ratios account for most of the persistence in mutual fund performance (Carhart, 1992; Carhart, 1997). However, since equity mutual funds are grouped into styles (e.g., large value, small growth, mid-cap growth, etc.) and are often confined to trading stocks within their style, one should measure fund performance relative to style when investigating managerial ability. Using CRSP mutual fund data and a methodology similar to Carhart (1997), we find that differences in style-adjusted fund returns persist for up to six years. Neither one-year momentum nor expense ratios explain our results. Our results are also robust to controlling for size, book-to-market equity, load, and total net assets. Since manager tenure is about four years, our results suggest that managerial ability may not be as dead as it seems.
Download or read book Mutual Fund Flows Performance Persistence and Manager Skill written by Yan Albert Wang and published by . This book was released on 2014 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper adapts the model of Berk and Green (2004) to explain with reasonable success the data on mutual fund returns and flows. Using a Bayesian measure of fund-manager skill that controls for fund flows, I find that posterior estimates of skill vary substantially in the cross section and that perceived differences in ability persist through time. Consistent with the model, investor fund flows respond in a convex manner to posterior updates of manager skill scaled by functions of the expense ratio, and this result is robust after including a convex function of past performance. While cross-sectional variation in posterior skill estimates has predictive power for out-of-sample subsequent fund performance, such predictability is present only in the short run. Beyond one year, high-skilled managers do not consistently out-perform low-skilled managers as skill-chasing fund flows equalize the realized abnormal fund returns across managers. Overall, my empirical evidence is consistent with some managers possessing high ability, investors rationally chasing returns generated by those managers, and lack of long-run persistence in fund returns due to equilibrating fund flows and diseconomies of scale in assets under management. Outside of the model, I show that the cross-sectional distribution of managerial ability is related to fund style and fund-manager compensation in a way that is consistent with matching the managerial productivity to the nature of the underlying portfolio.
Download or read book Short Term Persistence in Mutual Fund Market Timing and Stock Selection Abilities written by Evangelos Benos and published by . This book was released on 2009 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using daily return data from 448 actively managed mutual funds over a recent 9-year period, we look for persistence, over two consecutive quarters, in the ability of funds to select individual stocks and time the market. That is, we decompose overall fund performance into excess returns resulting from stock selection and timing abilities and we separately test for persistence in each ability. We find persistence in the ability to time the market only among well performing funds and in the ability to select stocks only among the very best and worst performers. The existing literature patterns appear only when funds are ranked by their overall performance, which includes stock selection, market timing and fees. With respect to overall performance, there is persistence among most poorly performing and only the top well performing funds. Furthermore, the profitability of a winner-picking strategy depends on the rebalancing frequency and potentially the size of the investment. Small investors cannot profit, whereas large investors can take advantage of the class A share fee structure and realize positive abnormal returns by annually rebalancing their portfolios.
Download or read book Persistence in Mutual Fund Performance written by Zekeriya Eser and published by . This book was released on 2007 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: Keywords. Persistence, Calendar-Related Distortions, Robot Funds, Performance Attribution Models, Momentum Factors
Download or read book Style Rotation and Performance Persistence of Mutual Funds written by Iwan Meier and published by . This book was released on 2008 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Explaining Persistence in Mutual Fund Performance written by F. Detzel and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the determinants of persistence in mutual fund performance. Previous research that uses factor-mimicking portfolios and characteristic benchmarks to model fund performance fails to explain all the persistence in fund returns. This study employs a model that directly relates mutual fund returns to the characteristics of the stocks held by funds. Adjusting fund returns for the size of the stocks in which funds invest and financial ratios intended to capture fund manager investment styles explains all the persistence in mutual fund returns from 1976-1985, the period in which persistence is most prevalent.
Download or read book Mutual Fund Flows Performance Persistence and Manager Skill written by Yan Wang and published by . This book was released on 2007 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Persistence Survivorship Bias in Mutual Funds An Indian Experience written by Manju Punia Chopra and published by LAP Lambert Academic Publishing. This book was released on 2012-03-01 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study utilizes few selected performance evaluation techniques on a sample of 36 Indian mutual fund schemes, over the period of January 2001 to September 2009. The broad based S&P CNX NIFTY is used in the study as a benchmark. The results concluded that these 36 mutual fund managers were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy. There was very little evidence of any individual fund being able to do significantly better than which was expected from random chance. On the other hand, no evidence of curvature of the characteristic lines, indicating superior timing skill, is found for any of the funds. In addition, the study offers little evidence of persistence in either the stock selection ability or the timing ability of the fund managers. Mutual fund attrition can create problems for a researcher because funds disappear due to presumably poor performance resulting into bias in research outcome. In this study we also revisit the mutual fund performance, including the disappeared mutual fund schemes during sample period. By tracking disappeared funds, the study does not find any evidence of survivorship bias.
Download or read book Mutual Funds written by Seth Anderson and published by Springer Science & Business Media. This book was released on 2006-03-30 with total page 169 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual funds are the dominant form of investment companies in the United States today, with approximately $7 trillion in assets under management. Over the past half century an important body of academic research has addressed various issues about the nature of these companies. These works focus on a wide range of topics, including fund performance, investment style, and expense issues, among others. MUTUAL FUNDS: Fifty Years of Research Findings is designed for the academic researcher interested in the various issues surrounding mutual funds and for the practitioner interested in funds for investment purposes. The authors briefly trace the historical evolution of funds, present important aspects of the Investment Company Act of 1940, and then summarize a substantial portion of the academic literature which has been written over the past five decades. "This book presents an outstanding wealth of information on mutual funds in a remarkably readable format. It is probably the most comprehensive work currently available on funds. The book sheds light on the numerous issues surrounding mutual fund performance and pricing and is an important resource for any serious investor." Kathleen A. Wayner, Bowling Portfolio Management, President and CEO
Download or read book Derivatives written by Keith Cuthbertson and published by John Wiley & Sons. This book was released on 2019-12-16 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: Three experts provide an authoritative guide to the theory and practice of derivatives Derivatives: Theory and Practice and its companion website explore the practical uses of derivatives and offer a guide to the key results on pricing, hedging and speculation using derivative securities. The book links the theoretical and practical aspects of derivatives in one volume whilst keeping mathematics and statistics to a minimum. Throughout the book, the authors put the focus on explanations and applications. Designed as an engaging resource, the book contains commentaries that make serious points in a lighthearted manner. The authors examine the real world of derivatives finance and include discussions on a wide range of topics such as the use of derivatives by hedge funds and the application of strip and stack hedges by corporates, while providing an analysis of how risky the stock market can be for long-term investors, and more. To enhance learning, each chapter contains learning objectives, worked examples, details of relevant finance blogs technical appendices and exercises.
Download or read book Investment Criteria for Mutual Fund Selection written by Jan Harkopf and published by diplom.de. This book was released on 2016-10-07 with total page 87 pages. Available in PDF, EPUB and Kindle. Book excerpt: The importance of mutual funds for individual investors has increased in recent decades. This becomes apparent when looking at the increased share of households owning mutual funds. These mutual fund investors usually want to receive a return which is above or at least close to the mutual fund’s benchmark. Consequently, investors want to invest in those funds which will show these patterns in the future. Some of these mutual funds receive much attention, since they generate extraordinary high performance. But the question that remains is whether it is possible to predict such performance before funds exhibit such outstanding performance. In the past, mutual fund investors focused extensively on performance or performance linked patterns, like the Morningstar star rating, and thus chased past performance. This seems surprising since performance persists only over a short time and is more persistent to weak mutual funds (1 and 2 star rated) than well performing mutual funds. Thus, chasing past performances seems to be a rather inferior strategy. Therefore, investors should try to identify alternative tools showing a high correlation to future mutual fund performance. In this book, mutual funds are analysed, especially open-end mutual funds and actively managed mutual funds. The main focus is on what purpose and usefulness active investments have and whether performance is persistent and what the determinants of mutual fund flows are. Moreover, some alternative measures will be introduced by explaining which attributes or methods should be used and avoided when selecting mutual funds.
Download or read book Portfolio Performance Evaluation written by George O. Aragon and published by Now Publishers Inc. This book was released on 2008 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe (1964), were developed prior to 1990. We discuss some of the properties and important problems associated with these measures. We then review the more recent Conditional Performance Evaluation techniques, designed to allow for expected returns and risks that may vary over time, and thus addressing one major shortcoming of the traditional measures. We also discuss weight-based performance measures and the stochastic discount factor approach. We review the evidence that these newer measures have produced on selectivity and market timing ability for professional managed investment funds. The evidence includes equity style mutual funds, pension funds, asset allocation style funds, fixed income funds and hedge funds.
Download or read book An Examination of the Factors Influencing Mutual Fund Performance written by Meadhbh Sherman and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study looks at some factors influencing mutual fund performance. Fund management location, family status and asset allocation and timing ability are examined. Using monthly returns on 4545 funds from Morningstar from January 1970 to June 2010, the study examines whether location influences the return a fund generates. It is found that U.S. managed funds outperform European managed funds, regardless of market invested in. This can be seen in terms of higher mean alpha, and statistically significant outperformance. A comparison is also carried out between the performance of family funds and non-family funds. Using the recursive portfolio technique and Rhodes utility based measure of persistence, the persistence of funds that are in a family are compared to those that do not belong to a family. A second hypothesis is also examined here, analyzing whether fund managers make their risk decision to influence performance for the second part of the year based on their performance in the first part of the year. It can be concluded that family status, family size or market does not affect persistence in performance. The study found that family rank has an impact on the risk adjustment behaviour of fund managers. The fact that the coefficient is negative suggests that managers are not behaving strategically. When markets are examined individually, fund managers within families compete in the U.S. and behave strategically in Europe. Finally, using asset allocation data on balanced funds, the study examines the skill of balanced fund managers to time particular asset classes. It is found that there is little timing ability present, across all markets and models.
Download or read book Heterogeneity and Persistence in Returns to Wealth written by Andreas Fagereng and published by International Monetary Fund. This book was released on 2018-07-27 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway’s administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points - and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.
Download or read book Mutual Fund Persistence Using Kalman Filter Models written by Adam James Corbett and published by . This book was released on 2015 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a dynamic state-space framework, we examine the persistence of US equity mutual fund performance. Performance is estimated from standard factor models via a Kalman filter following that of Mamaysky et al. (2008), which has not been used in the persistence literature until now. Persistence is tested across monthly, quarterly, biannual and annual horizons from 1995 to 2015. In opposition with current literature, we present strong evidence that funds exhibit persistence in risk-adjusted performance across all measurement horizons, and is not driven by fund fees. However, persistence in risk-adjusted performance is unable to translate into immediately higher net returns for investors. These findings lend support to the notion that some fund managers do possess skill in their ability to select stocks.
