Self-Declared Benchmarks and Fund Manager Intent: Cheating or Competing?

49 Pages Posted: 6 May 2022

See all articles by Huaizhi Chen

Huaizhi Chen

University of Notre Dame - Department of Finance

Richard B. Evans

University of Virginia - Darden School of Business

Yang Sun

Brandeis University- International Business School

Date Written: May 3, 2022

Abstract

We examine the selection of fund self-declared benchmarks. While the incidence of style mismatched benchmarks is high at the beginning of our sample (41% of fund assets/34% of funds), it declines significantly over time. This decline is driven primarily by existing funds changing their self-declared benchmarks to correctly match their style. In examining why funds ‘correct’ their benchmarks over time, we find that investor learning, institutional investor governance, product market competition and fund company risk management all play a role. Lastly, we find that funds overseen by entrenched managers are more likely to use a mismatched benchmark.

Keywords: Mutual Fund, Benchmarks, Benchmarking, Performance Evaluation

JEL Classification: G1, G11, G2, G23

Suggested Citation

Chen, Huaizhi and Evans, Richard B. and Sun, Yang, Self-Declared Benchmarks and Fund Manager Intent: Cheating or Competing? (May 3, 2022). Available at SSRN: https://ssrn.com/abstract=4099685 or http://dx.doi.org/10.2139/ssrn.4099685

Huaizhi Chen (Contact Author)

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Richard B. Evans

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4030 (Phone)
434-243-7680 (Fax)

HOME PAGE: http://faculty.darden.virginia.edu/evansr/

Yang Sun

Brandeis University- International Business School ( email )

415 South Street MS032
Waltham, MA 02453
United States
781-736-4708 (Phone)

HOME PAGE: http://www.brandeis.edu/facultyguide/person.html?emplid=c82c39a3be3416bc5844f2049d540871fd331eaf

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