Fund Performance Measurement Respecting an Industry Benchmark

70 Pages Posted: 23 Nov 2019 Last revised: 22 Jan 2020

See all articles by Gurdip Bakshi

Gurdip Bakshi

Fox School of Business

John Crosby

University of Maryland - Robert H. Smith School of Business

Xiaohui Gao Bakshi

Fox School of Business, Temple University

Date Written: August 29, 2019

Abstract

We develop an axiomatically consistent way of ranking and scoring funds that respects an industry benchmark. Our performance measure, termed MAP, accounts for the feature that investors may exhibit skepticism when evaluating investment strategies versus a benchmark. Linking developed theory to data and using the CRSP value-weighted index as the benchmark, we feature evidence on (i) desirability of popular investment strategies, (ii) whether investors gain by selling the tails of return distributions, (iii) rank-ordering of actively managed mutual funds, (iv) predicting fund flows using MAP, (v) variables that forecast MAP performance of mutual funds, and (vi) distribution of fund performance.

Keywords: mutual fund, benchmark, ambiguity aversion

Suggested Citation

Bakshi, Gurdip S. and Crosby, John and Gao, Xiaohui, Fund Performance Measurement Respecting an Industry Benchmark (August 29, 2019). Available at SSRN: https://ssrn.com/abstract=3485661 or http://dx.doi.org/10.2139/ssrn.3485661

Gurdip S. Bakshi

Fox School of Business ( email )

Department of Finance
Philadelphia, PA 19022
United States
215-204-6117 (Phone)
tuk40718@temple.edu (Fax)

HOME PAGE: http://https://sites.google.com/view/gurdipbakshi1

John Crosby

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
+447979901892 (Phone)

HOME PAGE: http://www.john-crosby.co.uk/

Xiaohui Gao (Contact Author)

Fox School of Business, Temple University ( email )

Philadelphia, PA 19122
United States

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