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THE POWER OF TESTS OF FUND MANAGER PERFORMANCE
Author(s) -
Ashton D.J.
Publication year - 1996
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1996.tb00398.x
Subject(s) - equity (law) , business , performance fee , fund administration , investment management , work (physics) , manager of managers fund , target date fund , econometrics , actuarial science , open end fund , economics , fund of funds , finance , institutional investor , mechanical engineering , political science , market liquidity , law , engineering , corporate governance
Recent work in this and other journals has re‐examined the econometric pro‐cedures which are used to investigate the performance of fund managers. This has resulted in considerable refinement of the methodology used to assess whether fund managers can time the relative proportions of equity and fixed interest securities in their portfolios. In this paper the power of these refine‐ments is examined. It is shown that at the level of forecasting ability observed in market professionals, a statistically significant superior performance is unlikely to be found in ex‐post investigations of the performance of individual fund managers. It is argued though that this observed level of forecasting ability is still sufficient to produce a significant improvement in the returns on managed funds.