Unobserved Actions of Mutual Funds
Marcin T. Kacperczyk
Imperial College London - Accounting, Finance, and Macroeconomics; National Bureau of Economic Research (NBER)
University of Texas at Austin - McCombs School of Business; Stanford University; National Bureau of Economic Research (NBER)
University of California, Irvine - Paul Merage School of Business
Review of Financial Studies, Forthcoming
Sixteenth Annual Utah Winter Finance Conference
EFA 2005 Moscow Meetings Paper
Sauder School of Business Working Paper
Despite extensive disclosure requirements, mutual fund investors do not observe all actions of fund managers. We estimate the impact of unobserved actions on fund returns using the return gap - the difference between the reported fund return and the return on a portfolio that invests in the previously disclosed fund holdings. We document that unobserved actions of some funds persistently create value, while such actions of other funds destroy value. Our main result shows that the return gap predicts fund performance.
Number of Pages in PDF File: 58
Keywords: Mutual Funds, Performance Evaluation, Trading Strategies
JEL Classification: G1, G2, G23Accepted Paper Series
Date posted: February 28, 2005
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