Representative Investors Versus Best Clienteles: Performance Evaluation Disagreement in Mutual Funds

61 Pages Posted: 1 Jun 2017

See all articles by Stéphane Chrétien

Stéphane Chrétien

Université Laval

Manel Kammoun

Université du Quebec en Outaouais (UQO)

Date Written: March 1, 2017

Abstract

This paper develops a diagnostic tool for candidate performance measures that accounts for investor disagreement in mutual funds. We compare the evaluation for best clienteles, specified by an upper admissible performance bound, to the one for representative investors implicit in twelve models. The results show that linear factor models misrepresent best clientele alphas, with a disagreement that relates to fund characteristics. Consumption-based alphas are generally inadmissible. The manipulation-proof performance measure generates alphas that are sensitive to its risk aversion parameter and lack statistical precision. However, a reasonable parameter gives admissible values that reflect the alphas for the most favorable clienteles.

Keywords: Portfolio Performance Measurement, Performance Disagreement, Performance Manipulation, Mutual Fund

JEL Classification: G12, G23

Suggested Citation

Chrétien, Stéphane and Kammoun, Manel, Representative Investors Versus Best Clienteles: Performance Evaluation Disagreement in Mutual Funds (March 1, 2017). Available at SSRN: https://ssrn.com/abstract=2977656 or http://dx.doi.org/10.2139/ssrn.2977656

Stéphane Chrétien (Contact Author)

Université Laval ( email )

Pavillon Palasis-Prince
2325, rue de la Terrasse
Quebec City, Quebec G1V 0A6
Canada
418-656-2131 x3380 (Phone)

Manel Kammoun

Université du Quebec en Outaouais (UQO) ( email )

Case postale 1250
succursale Hull
Gatineau, Québec J8X 3X7
Canada

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