The Performance of Corporate-Bond Mutual Funds: Evidence Based on Security-Level Holdings

53 Pages Posted: 5 Mar 2010 Last revised: 22 Dec 2010

Gjergji Cici

College of William and Mary - Mason School of Business

Scott Gibson

College of William and Mary - Mason School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2010

Abstract

This is the first study of corporate-bond mutual fund performance that examines detailed security-level holdings and returns. The new database allows us to decompose the costs and benefits of active management. In contrast to prior research on equity funds that shows evidence of stock-selection ability, we do not find evidence consistent with bond fund managers, on average, being able to select corporate bonds that outperform other bonds with similar characteristics. We find neutral to weakly positive evidence of ability to time corporate bond characteristics. Overall results show that the costs of active management on average appear larger than the benefits.

Keywords: corporate bonds, mutual funds, performance, selectivity, timing, style

Suggested Citation

Cici, Gjergji and Gibson, Scott, The Performance of Corporate-Bond Mutual Funds: Evidence Based on Security-Level Holdings (December 1, 2010). AFA 2011 Denver Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1564486 or http://dx.doi.org/10.2139/ssrn.1564486

Gjergji Cici (Contact Author)

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757-221-1826 (Phone)

George Scott Gibson

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757/221-1673 (Phone)

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