Evaluating Mutual Fund Performance

46 Pages Posted: 13 Apr 1998  

S.P. Kothari

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Jerold B. Warner

University of Rochester – Simon Business School

Date Written: August 1997

Abstract

We study standard mutual fund performance measures, using simulation procedures combined with random and random-stratified samples of NYSE and AMEX securities. We track simulated fund portfolios over time. These portfolios? performance is ordinary, and well-specified performance measures should not indicate abnormal performance. Our main result, however, is that the performance measures are badly misspecified. Regardless of the performance measure, there are indications of abnormal fund performance, including market-timing ability, when none exists.

JEL Classification: G12, G14

Suggested Citation

Kothari, S.P. and Warner, Jerold B., Evaluating Mutual Fund Performance (August 1997). Available at SSRN: https://ssrn.com/abstract=75871 or http://dx.doi.org/10.2139/ssrn.75871

S.P. Kothari (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-325
Cambridge, MA 02142
United States
617-253-0994 (Phone)
617-253-0603 (Fax)

Jerold B. Warner

University of Rochester – Simon Business School ( email )

Carol Simon Hall 3-160H
Rochester, NY 14627
United States
585-275-2678 (Phone)
585-442-6323 (Fax)

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