Alpha: Empirical Evidence of Mutual Fund Performance under Different Economic Cycles and over Fund Objectives
38 Pages Posted: 27 Aug 2011
Date Written: August 25, 2011
We use daily geometric mean returns to investigate abnormal returns in mutual funds by applying four well known models, namely the CAPM, three-moment CAPM, Fama and French (1993) three-factor and Carhart (1997) four-factor models under different economic cycles and over different fund objectives. Our results show that the economic cycle does affect the mutual fund performance especially over the bear periods. However, the results from different fund objectives are inconclusive, implying that abnormal returns are not objective-specific. Moreover, meta analysis shows that the abnormal returns are statistically significantly different across deciles and models, meaning that each decile and model yields different abnormal returns.
Suggested Citation: Suggested Citation