Mutual fund performance evaluation with active peer benchmarks

• 成果类型: Article
• 署名作者: Hunter, David; Kandel, Eugene; Kandel, Shmuel; Wermers, Russ
• 署名单位: University of Hawaii System; Hebrew University of Jerusalem; Center for Economic & Policy Research (CEPR); Tel Aviv University; University System of Maryland; University of Maryland College Park
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.12.006
• 发表日期: 2014
• 页码: 1-29
• 关键词: mutual funds; Performance measurement

摘要

We propose a simple approach to account for commonalities in mutual fund strategies that relies solely on information on fund returns and investment objectives. Our approach augments commonly used factor models with an additional benchmark that represents an equal investment in all same-category funds, which we call an active peer benchmark (APB). We find that APBs substantially reduce the average time series correlation of residuals between individual funds within a group when added to a four-factor equity model (or to a seven-factor fixed-income model). Importantly, adding this APB significantly improves the selection of funds with future outperformance. (C) 2014 Elsevier B.V. All rights reserved.