Premium
Measuring Fund Strategy and Performance in Changing Economic Conditions
Author(s) -
FERSON WAYNE E.,
SCHADT RUDI W.
Publication year - 1996
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/j.1540-6261.1996.tb02690.x
Subject(s) - mutual fund , variation (astronomy) , public information , sample (material) , asset (computer security) , mutual information , econometrics , capital asset pricing model , economics , computer science , actuarial science , microeconomics , finance , artificial intelligence , computer security , chemistry , physics , internet privacy , chromatography , astrophysics
The use of predetermined variables to represent public information and time‐variation has produced new insights about asset pricing models, but the literature on mutual fund performance has not exploited these insights. This paper advocates conditional performance evaluation in which the relevant expectations are conditioned on public information variables. We modify several classical performance measures to this end and find that the predetermined variables are both statistically and economically significant. Conditioning on public information controls for biases in traditional market timing models and makes the average performance of the mutual funds in our sample look better.