Conditioning Information and European Bond Fund Performance

Silva, Florinda; Cortez, Maria Céu

doi:10.2139/ssrn.300539

“…This finding is consistent with the results reported in Ferson and Schadt (1996) for U.S. mutual funds and Silva et al (2003) for European bond funds, but they are in contrast to the results in Dahlquist et al (2000) for Swedish funds and Bessler et al (2009) for German mutual funds. A possible interpretation of this finding is provided by Ferson and Schadt (1996), based on their observation that the term , , is negative for the average fund.…”

Section: Regression Resultssupporting

confidence: 91%

Why not use SDF rather than beta models in performance measurement?

Gusset

¹

,

Zimmermann

²

2014

Financ Mark Portf Manag

2

0

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This paper analyzes performance measurement based on stochastic discount factors, compared to beta models traditionally used in computing funds' (Jensen) alphas. From a theoretical point of view, standard alphas suffer from several limitations. Our paper addresses this issue from an empirical point of view using a sample of Swiss mutual funds from 2000 to 2011. Our results suggest that the key for a "fair" comparison between SDF and beta models is the specification of the set of primitive assets used to calibrate the SDF function. Once this is established, the size of (absolute) performance differences considerably decreases between the two model families. However, there are sizeable performance deviations in the cross-section of funds if conditioning information is incorporated in the tests, up to some 20 basis points per month, or about 2.3% per year. In almost all cases, the SDF-alphas are lower than the standard (Jensen) alphas. In absolute terms, the average SDF-based underperformance of the funds is way larger than the average expense ratio of the funds, both in a conditional and unconditional setting.

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“…Exhibit 2 This finding is consistent with the results reported in Ferson and Schadt (1996) for U.S. mutual funds and Silva et al (2003) for European bond funds, but they are in contrast to the results in Dahlquist et al (2000) for Swedish funds and Bessler et al (2009) for German mutual funds. A possible interpretation of this finding is provided by Ferson and Schadt (1996), based on their observation that the term , , is negative for the average fund.…”

Section: Regression Resultssupporting

confidence: 85%

Why Not Use SDF - Rather than Beta Models in Performance Measurement?

Gusset

¹

,

Zimmermann

²

2012

SSRN Journal

0

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This paper analyzes performance measurement based on stochastic discount factors, compared to beta models traditionally used in computing funds' (Jensen) alphas. From a theoretical point of view, standard alphas suffer from several limitations. Our paper addresses this issue from an empirical point of view using a sample of Swiss mutual funds from 2000 to 2011. Our results suggest that the key for a "fair" comparison between SDF and beta models is the specification of the set of primitive assets used to calibrate the SDF function. Once this is established, the size of (absolute) performance differences considerably decreases between the two model families. However, there are sizeable performance deviations in the cross-section of funds if conditioning information is incorporated in the tests, up to some 20 basis points per month, or about 2.3% per year. In almost all cases, the SDF-alphas are lower than the standard (Jensen) alphas. In absolute terms, the average SDF-based underperformance of the funds is way larger than the average expense ratio of the funds, both in a conditional and unconditional setting.

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“…But practically it is not so happen. In fact, these measures represent an unconditional approach in the sense that they do not consider publicly available information about the state of the economy in the estimation of expected returns and risk, assuming that these are constant over time (Silva et al, 2003). Practically, both expected return and risk are changed with the change of time.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Some studies point out that important public information like dividend yields of index or exchange rates or interest rates if include in the performance evaluation model then the stock and bond returns are improved (Fama & French, 1989;Ilmanen, 1995;Pesaran &Timmermann 1995, Silva et al 2003). …”

Section: Literature Reviewmentioning

confidence: 99%

Conditional selectivity performance of Indian mutual fund schemes: An empirical study

Roy¹

2015

10.5267/j.msl

2

0

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The present study seeks to examine the stock-selection performance of the sample open-ended equity mutual fund schemes of Birla Sun Life Mutual Fund Company based on traditional and conditional performance measures. It is generally expected that inclusion of some relevant predetermined public information variables in the conditional CAPM provides better performance estimates as compared to the traditional measures. The study reports that after inclusion of conditioning public information variables, the selectivity performances of the schemes have dramatically improved relative to the traditional measure and also found that conditional measure is superior to traditional measure in statistical test.Growing Science Ltd. All rights reserved. 5

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Conditioning Information and European Bond Fund Performance

Cited by 16 publications

References 36 publications

Why not use SDF rather than beta models in performance measurement?

Why not use SDF rather than beta models in performance measurement?

Why Not Use SDF - Rather than Beta Models in Performance Measurement?

Conditional selectivity performance of Indian mutual fund schemes: An empirical study

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