Survivor Bias and Persistence in Mutual Fund Performance PDF Download
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Author: Mark Monroe Carhart
Publisher:
ISBN:
Category : Mutual funds
Languages : en
Pages : 322
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Author: Mark Monroe Carhart
Publisher:
ISBN:
Category : Mutual funds
Languages : en
Pages : 322
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Book Description
Author: Mark M. Carhart
Publisher:
ISBN:
Category :
Languages : en
Pages : 161
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Author: Mark M. Carhart
Publisher:
ISBN:
Category : Financial institutions
Languages : en
Pages : 161
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Author: Xinghua Liang
Publisher:
ISBN:
Category : Investments
Languages : en
Pages : 0
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This paper examines the influence of the survivorship bias on performance persistence in Canadian mutual funds. Our sample covers the period of January 1986 till December 1999. Spreads of the survivorship bias on mutual fund returns are gauged by comparing the difference between the sample of surviving funds and the sample of surviving and defunct funds. The comparisons are conducted first only on equity funds, and later on funds in all categories. Contingency tables are used to address the question of performance persistence. Cross Product Ratios (CPR) are obtained for all funds, active and inactive, on an annual basis. Probit models are used to explore the odds of and factors that contribute to the disappearance of funds. Major findings of this study are as follows. The effects of the survivorship bias on Canadian mutual funds are nontrivial. Persistence of fund performance has been found, while reversals are also observed. The persistence is correlated across managers; this may be due to certain common factors. An examination of fund disappearance in the probit models indicates that funds' return, size, and expense ratios are significant predictors of fund's attrition, while the optional sales charges, whether a fund is affiliated with an insurance company, and how long the fund has been in existence are also significant other factors. These results are consistent with those reported for the US mutual fund industry.
Author: Mark M. Carhart
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Using a sample free of survivor bias, I demonstrate that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual funds' mean and risk-adjusted returns. Hendricks, Patel and Zeckhauser's (1993) quot;hot handsquot; result is mostly driven by the one-year momentum effect of Jegadeesh and Titman (1993), but individual funds do not earn higher returns from following the momentum strategy in stocks. The only significant persistence not explained is concentrated in strong underperformance by the worst-return mutual funds. The results do not support the existence of skilled or informed mutual fund portfolio managers.
Author: Manju Punia Chopra
Publisher: LAP Lambert Academic Publishing
ISBN: 9783847347828
Category :
Languages : en
Pages : 88
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This study utilizes few selected performance evaluation techniques on a sample of 36 Indian mutual fund schemes, over the period of January 2001 to September 2009. The broad based S&P CNX NIFTY is used in the study as a benchmark. The results concluded that these 36 mutual fund managers were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy. There was very little evidence of any individual fund being able to do significantly better than which was expected from random chance. On the other hand, no evidence of curvature of the characteristic lines, indicating superior timing skill, is found for any of the funds. In addition, the study offers little evidence of persistence in either the stock selection ability or the timing ability of the fund managers. Mutual fund attrition can create problems for a researcher because funds disappear due to presumably poor performance resulting into bias in research outcome. In this study we also revisit the mutual fund performance, including the disappeared mutual fund schemes during sample period. By tracking disappeared funds, the study does not find any evidence of survivorship bias.
Author: Svetla Kirilova Tzenova
Publisher:
ISBN:
Category :
Languages : en
Pages : 76
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Author: Mark M. Carhart
Publisher:
ISBN:
Category :
Languages : en
Pages : 67
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This paper offers a comprehensive study of survivorship issues, in the context of mutual fund research, using the mutual fund data set of Carhart (1997). We find that funds in our sample disappear primarily because of multi-year poor performance. Then we demonstrate analytically that this survival rule typically causes the survivor bias in average performance to increase in the length of the sample period, though it is possible to construct counterexamples. In the data, we find a strong positive relation between the survivor bias in average performance and sample period length. The bias is economically small at 17 basis points per annum for one-year samples, but a significantly larger one percent per annum for samples longer than fifteen years. We also find evidence of performance persistence in our sample and, consistent with the presence of a multi-period survival rule, we find that the persistence is weakened by survivorship bias. Finally, we explain how the relation between performance and fund characteristics can be affected by the use of a survivor-only sample and show that the magnitudes of the biases in the slope coefficients are large for fund size, expenses, turnover and load fees in our sample. Because survivorship issues are relevant for many data sets used in finance, the analysis in this paper has potential applications in areas of financial economics beyond just mutual fund research.
Author: Jenke ter Horst
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Performance persistence studies typically suffer from ex-post conditioning biases. As stressed by Carhart (1997a) and Carpenter and Lynch (1999), standard methods of analysis on a survivorship free sample are subject to look-ahead biases. In this paper, we show how one can easily correct for look-ahead bias using weights based on probit regressions.First, we model how survival probabilities depend upon historical returns, fund age and aggregate economy-wide shocks, using two samples of US based 'income' and 'growth' funds. Subsequently, we employ a Monte Carlo study to analyze the size and shape of the look-ahead bias in performance persistence that arise when a survivorship free sample is used with standard techniques. In particular, we show that look-ahead bias induces a spurious U-shaped pattern in performance persistence. Finally, we demonstrate how a weighting procedure based upon probit regressions can be used to correct for this bias. In this way, we obtain look-ahead bias-corrected estimates of abnormal performance relative to a one-factor and the Carhart (1997b) four-factor model, as well as its persistence. The results suggest that in this sample, look-ahead bias is of minor importance and does not seriously affect estimates of persistence. Our bias-corrected results closely correspond to the findings of Carhart (1997b), implying that there is no evidence on a risk-adjusted basis for persistence in performance.
Author: Martin Rohleder
Publisher:
ISBN:
Category :
Languages : de
Pages :
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