58 Pages Posted: 28 Feb 2005
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: 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