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Conditioning Information and European Bond Fund Performance
Author(s) -
Silva Florinda,
Cortez Maria do Céu,
Armada Manuel Rocha
Publication year - 2003
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/1468-036x.00216
Subject(s) - econometrics , bond , explanatory power , index (typography) , stock market index , economics , conditioning , bond market , stock (firearms) , predictive power , bond market index , stock market , actuarial science , computer science , mathematics , statistics , monetary economics , finance , mechanical engineering , paleontology , philosophy , epistemology , horse , world wide web , biology , engineering
In this paper we evaluate the performance of European bond funds using unconditional and conditional models. As conditioning information we use variables that we find to be useful in predicting bond returns in the European market. The results show that, in general, bond funds are not able to outperform passive strategies. These findings are robust to whatever model (unconditional versus conditional and single versus multi‐index) we use. The multi‐index model seems to add some explanatory power in relation to the single‐index model. Furthermore, when we incorporate the predetermined information variables, we can observe a slight tendency towards better performance. This evidence is consistent with previous studies on stock funds and comes in support of the argument that conditional models might allow for a better assessment of performance. However, our results suggest that the impact of additional risk factors seems to be greater than the impact of incorporating predetermined information variables.