Open AccessSurvivor Bias and Mutual Fund Performance
Author(s) -
Edwin J. Elton,
Martin J. Gruber,
Christopher R. Blake
Publication year - 1996
Publication title -
review of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 12.8
H-Index - 190
eISSN - 1465-7368
pISSN - 0893-9454
DOI - 10.1093/rfs/9.4.1097
Subject(s) - merge (version control) , mutual fund , attrition , survivorship curve , econometrics , actuarial science , economics , business , computer science , finance , demography , medicine , population , dentistry , sociology , information retrieval
Mutual fund attrition can create problems for a researcher because funds that disappear tend to do so due to poor performance. In this article we estimate the size of the bias by tracking all funds that existed at the end of 1976. When a fund merges we calculate the return, taking into account the merger terms. This allows a precise estimate of survivorship bias. In addition, we examine characteristics of both mutual funds that merge and their partner funds. Estimates of survivorship bias over different horizons and using different models to evaluate performance are provided. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
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