Revisiting Mutual Fund Performance Evaluation

Timotheos Angelidis, Daniel Giamouridis, Nikolaos Tessaromatis: Mutual fund manager excess performance should be measured relative to their self-reported benchmark rather than the return of a passive portfolio with the same risk characteristics.

Author(s):

Timotheos Angelidis

Daniel Giamouridis

EDHEC Business School

Nikolaos Tessaromatis

EDHEC Business School

Ignoring the self-reported benchmark results in different measurement of stock selection and timing components of excess performance. We revisit baseline empirical evidence in mutual fund performance evaluation utilising stock selection and timing measures that incorporate the self-reported benchmark. We introduce a new factor exposure based approach for measuring the – static and dynamic – timing capabilities of mutual fund managers. We overall conclude that current studies are likely to be overstating lack of skill because they ignore the managers’ selfreported benchmark in the performance evaluation process.

Type: Working paper
Date: le 06/02/2012
Research Cluster : Finance

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