The Volatility of Mutual Fund Performance

19 Pages Posted: 21 Mar 2019

See all articles by Miles Livingston

Miles Livingston

University of Florida - Department of Finance, Insurance and Real Estate

Ping Yao

Northern Illinois University

Lei Zhou

Northern Illinois University - Department of Finance

Date Written: February 5, 2019

Abstract

Previous research has shown that fund performance is reduced by higher expense ratios but improved by more active management. Using data for equity mutual funds from 1991-2012, we show that prior studies has overlooked the fact that a high degree of active management magnifies the extremes of performance. In addition, funds with higher expense ratios and turnover ratio have had greater volatility of performance as well as lower mean performance, a doubly adverse pattern. Thus, mutual funds with more active management, higher expense ratios and turnover ratios are riskier.

Suggested Citation

Livingston, Miles B. and Yao, Ping and Zhou, Lei, The Volatility of Mutual Fund Performance (February 5, 2019). Journal of Economics and Business, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3339553

Miles B. Livingston

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainsville, FL 32611-7168
United States
352-392-4316 (Phone)
352-392-0301 (Fax)

Ping Yao

Northern Illinois University ( email )

1425 W. Lincoln Hwy
Dekalb, IL 60115-2828
United States

Lei Zhou (Contact Author)

Northern Illinois University - Department of Finance ( email )

Wirtz Hall
DeKalb, IL 60115
United States
815-753-1115 (Phone)
815-753-0504 (Fax)

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