Performance information dissemination in the mutual fund industry

The MUTUAL FUND INDUSTRY

Risk Behavior and Performance Benchmarks in the Mutual Fund Industry

The determinants of risk tolerance play an essential role in asset pricing. In this paper, I develop and test empirically a behavioral model of investor risk strategies. Difficulty in quantifying many of the elements of behavioral theories has so far necessitated experimental, rather than empirical, evaluation of most such models. Therefore, the methodology employed in this paper – testing a be...

Measuring Skill in the Mutual Fund Industry∗

Using the dollar-value that a mutual fund adds as the measure of skill, we find that the average mutual fund adds about $2 million per year and that this skill persists for as long as 10 years. We further document that investors recognize this skill and reward it by investing more capital with better funds. Better funds earn higher aggregate fees, and there is a strong positive correlation betw...

Evaluating Mutual Fund Performance

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 m...

Market Discipline and Internal Governance in the Mutual Fund Industry∗

This paper develops a continuous-time model in which a portfolio manager is hired by a management company. Based on past portfolio returns, all agents update their beliefs about the manager’s skills. In response, investors can move capital into or out of the mutual fund, the portfolio manager can alter the risk of the portfolio and the management company can replace the manager. We examine the ...