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Evaluating Mutual Fund Performance
Author(s) -
Kothari S. P.,
Warner Jerold B.
Publication year - 2001
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00397
Subject(s) - mutual fund , target date fund , portfolio , closed end fund , fund administration , manager of managers fund , index fund , open end fund , business , returns based style analysis , finance , econometrics , fund of funds , computer science , actuarial science , economics , institutional investor , corporate governance , market liquidity
We study standard mutual fund performance measures, using simulated funds whose characteristics mimic actual funds. We find that performance measures used in previous mutual fund research have little ability to detect economically large magnitudes (e.g., three percent per year) of abnormal fund performance, particularly if a fund's style characteristics differ from those of the value‐weighted market portfolio. Power can be substantially improved, however, using event‐study procedures that analyze a fund's stock trades. These procedures are feasible using time‐series data sets on mutual fund portfolio holdings.