Unobserved Actions of Mutual Funds

58 Pages Posted: 28 Feb 2005  

Marcin T. Kacperczyk

Imperial College London - Accounting, Finance, and Macroeconomics; National Bureau of Economic Research (NBER)

Clemens Sialm

University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER)

Lu Zheng

University of California, Irvine - Paul Merage School of Business

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Abstract

Despite extensive disclosure requirements, mutual fund investors do not observe all actions of fund managers. We estimate the impact of unobserved actions on fund returns using the return gap - the difference between the reported fund return and the return on a portfolio that invests in the previously disclosed fund holdings. We document that unobserved actions of some funds persistently create value, while such actions of other funds destroy value. Our main result shows that the return gap predicts fund performance.

Keywords: Mutual Funds, Performance Evaluation, Trading Strategies

JEL Classification: G1, G2, G23

Suggested Citation

Kacperczyk, Marcin T. and Sialm, Clemens and Zheng, Lu, Unobserved Actions of Mutual Funds. Review of Financial Studies, Forthcoming; Sixteenth Annual Utah Winter Finance Conference; EFA 2005 Moscow Meetings Paper; Sauder School of Business Working Paper. Available at SSRN: https://ssrn.com/abstract=676103

Marcin T. Kacperczyk

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Clemens Sialm

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

HOME PAGE: http://faculty.mccombs.utexas.edu/Clemens.Sialm/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lu Zheng (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States
9498248365 (Phone)

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