Performance measurement with selectivity, market and volatility timing

Ferson, Wayne E.; Mo, Haitao

doi:10.1016/j.jfineco.2016.02.012

Cited by 71 publications

(16 citation statements)

References 58 publications

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“…In our final sample, we lose approximately 9% of the fund-quarter observations (approximately 6% of the total TNA), either due to missing WFICN links in the linking file or due to a lack of valid data in the Thomson Reuters Database (i.e., reported holdings were stale, corresponding to a disclosure more than 6 months ago). These statistics are very similar to what is reported by Ferson and Mo (2016). 32 The authors also investigate the convexity in the flow-performance relationship and the negative relationship between fund performance and the expense ratio documented by Gil-Bazo and Ruiz-Verdú (2009).…”

Section: Subsample Analysessupporting

confidence: 79%

Do Mutual Fund Investors Overweight the Probability of Extreme Payoffs in the Return Distribution?

Akbas¹,

Genc²

2018

J. Financ. Quant. Anal.

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We investigate the role of extreme positive payoffs in the distribution of monthly fund returns in investors’ mutual fund preferences. We document a positive and significant relationship between the maximum style-adjusted monthly return (MAX) and future fund flows. The relationship is robust to controlling for average performance, volatility, skewness, and various other fund characteristics. Our findings are consistent with the notion that fund investors overweight the probability of high payoff states in the past return distribution. We further show that MAX is not a useful predictor of future performance and that an increase in a fund’s visibility does not explain our findings.

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Section: Subsample Analysessupporting

confidence: 79%

Do Mutual Fund Investors Overweight the Probability of Extreme Payoffs in the Return Distribution?

Akbas¹,

Genc²

2018

J. Financ. Quant. Anal.

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“…This result is not very different from that found in the market timing literature. In this vein, Jiang et al () and Ferson and Mo (), amongst others, found that the overall average timing of the funds is negative or insignificant. With regard to SR funds, Ferruz et al () found negative market timing ability for a sample of British SR pension funds, and Leite and Cortez () had results in the same line for a sample of international SR funds.…”

Section: Resultsmentioning

confidence: 96%

“…Negative aggregated performance of SR funds is driven by the more specialised funds not included in the 3x3 Morningstar equity style matrix (31.19% of the SR funds). Jiang et al (2007) and Ferson and Mo (2016), among others:…”

Section: Managerial Implicationsmentioning

confidence: 99%

“…In addition to performance measurement we also focus on other manager abilities such as market timing, that is, anticipating the stock market by increasing (diminishing) the beta of the portfolio in upward (downward) states. Since the studies of Treynor and Mazuy (1966) and Henriksson and Merton (1981) a great deal of literature has appeared on this issue, where for conventional mutual funds the most common evidence found is of negative or non-significant timing, for instance, Jiang, Yao, and Yu (2007) and Ferson and Mo (2016), amongst others. Similar evidence is found for SR funds (Ferruz et al, 2010 andCortez, 2014b).…”

Section: Liter Ature Re Vie Wmentioning

confidence: 99%

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Does socially responsible mutual fund performance vary over the business cycle? New insights on the effect of idiosyncratic SR features

Matallín‐Sáez

Soler‐Domínguez

Mingo‐López

et al. 2018

Business Ethics: A Eur Rev

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This study analyses the performance and market timing of US socially responsible (SR) mutual funds in relation to business cycle regime shifts and different grouping criteria: Ethical strategy focus, SR attributes scores and Morningstar category. Different methodologies are applied and results highlight the importance of considering specific benchmarks related to the investment style in evaluating the SR fund performance. Our results show that, in aggregate, the abnormal performance of SR funds is negative and significant in expansion periods, but no significant differences are found in recession periods. When specific benchmarks are considered, performance improves in recession periods, particularly for environmental funds, those with high SR attributes scores, and funds from the nine Morningstar style box categories. Market timing of SR funds takes positive values and is partially significant. Previous evidence of negative timing after a recent financial crisis vanishes when specific benchmarks are considered. For comparative purposes the performance of conventional US mutual funds is also analysed. There are no significant differences between the performance of SR and conventional mutual funds when a fair comparison is made within the same style categories. When all the SR funds are considered, they underperform conventional funds in expansion sub‐periods, but in recession sub‐periods they perform better, although the differences observed are not significant.

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“…Extensive literature has examined the financial performance of mutual funds with diversified portfolios [11,12] created under the postulates of modern portfolio theory [13]. These postulates assume that portfolio managers and rational investors seek to maximize investment return while minimizing risk exposure through investment portfolios composed of stocks selected from several economic sectors.…”

Section: Literature Review and Development Of Hypothesesmentioning

confidence: 99%

Financial Performance of SDG Mutual Funds Focused on Biotechnology and Healthcare Sectors

Martí-Ballester

2020

Sustainability

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Measures favoring healthy lives among populations around the world are essential to reduce social inequalities. Mutual funds could play an important role funding these measures if they are able to attract socially concerned investors by improving their wealth. This study analyzes the financial performance of mutual funds focused on the biotechnology and healthcare sectors related to UN sustainable development goal 3 (SDG 3), comparing their risk-adjusted return with that achieved by conventional mutual funds. This study implements Carhart’s multifactor model and Bollen and Busse’s timing multifactor model on a sample of 34 biotechnology and 178 healthcare mutual funds and 4352 conventional mutual funds. The results show that biotechnology and healthcare mutual funds perform similarly, while both of them outperform conventional mutual funds. This outperformance of biotechnology and healthcare funds is driven by the superior stock-picking skills of their managers with regards to those of conventional fund managers, while managers of biotechnology, healthcare, and conventional mutual funds present similar poor market timing ability. Mutual funds specialized in biotechnology and healthcare sectors related to sustainable development goal 3 (SDG 3) outperform conventional mutual funds.

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Performance measurement with selectivity, market and volatility timing

Cited by 71 publications

References 58 publications

Do Mutual Fund Investors Overweight the Probability of Extreme Payoffs in the Return Distribution?

Do Mutual Fund Investors Overweight the Probability of Extreme Payoffs in the Return Distribution?

Does socially responsible mutual fund performance vary over the business cycle? New insights on the effect of idiosyncratic SR features

Financial Performance of SDG Mutual Funds Focused on Biotechnology and Healthcare Sectors

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