Suchergebnisse

AbstractThis study investigates the relative strength in mutual fund performance by employing three different empirical methods to analyze the profitability of twenty trading strategies, based on varying evaluation horizons and investment periods. Specifically, we test for positive persistence in fund performance by focusing on the optimal weighting of past performance information. Counter to an earlier study on relative strength of fund performance, this study's results do not support the decay of performance persistence after one year. Rather, we find persistent abnormal fund returns over a one to three year investment period based on a three to four year evaluation horizon. In addition, results show that relative strength in fund performance is directly related to persistence in superior performing funds rather than a function of persistence in inferior performing funds.

AbstractWe question time‐invariant indices as fund benchmarks and propose a regime‐switching methodology to identify time‐varying de facto benchmarks from a pool of market‐based indices, with or without a risk‐free asset. To ameliorate the benchmark mismatch issue, we highlight the importance of using time‐varying indices‐based benchmarks for fund performance evaluation. Our de facto benchmark captures fund styles better than other benchmark choices, substantially improves the identification of significant fund alphas, and provides better out‐of‐sample forecasts. We uncover several new findings in terms of fund performance evaluation using our de facto benchmarks.