Controlling for Fixed Income Exposure in Portfolio Evaluation: Evidence from Hybrid Mutual Funds

33 Pages Posted: 7 May 2006

See all articles by George Comer

George Comer

Georgetown University - Department of Finance

Norris L. Larrymore

Northwestern University

Javier Rodriguez

University of Puerto Rico; University of Puerto Rico - Escuela Graduada de Administración de Empresas (EGAE)

Multiple version iconThere are 2 versions of this paper

Date Written: April 27, 2006

Abstract

We examine whether controlling for funds' fixed income exposure affects the conclusions drawn in performance evaluation when a fund sample holds a significant amount of fixed income securities. We use daily return data to measure the performance of hybrid funds. Compared to the Carhart (1997) four factor model, we find that extended forms of the model which include various bond indices provide significantly different conclusions concerning the abnormal performance of the funds relative to the original model. Specifically, within one of our fund samples, abnormal return estimates change from positive to significantly negative. Overall, the results of our study motivate the use of bond indices in performance evaluation when portfolio data indicate that the sample of funds holds a substantial amount of fixed income securities.

Keywords: performance evaluation, fixed income securities, hybrid funds

JEL Classification: G20, G23, G11

Suggested Citation

Comer, George and Larrymore, Norris L. and Rodriguez, Javier, Controlling for Fixed Income Exposure in Portfolio Evaluation: Evidence from Hybrid Mutual Funds (April 27, 2006). Available at SSRN: https://ssrn.com/abstract=899393 or http://dx.doi.org/10.2139/ssrn.899393

George Comer (Contact Author)

Georgetown University - Department of Finance ( email )

585 Hariri Building
Georgetown University
Washington, DC 20057
United States
202-687-0676 (Phone)

Norris L. Larrymore

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
224-420-6120 (Phone)
847-491-5719 (Fax)

Javier Rodriguez

University of Puerto Rico ( email )

Río Piedras
Puerto Rico

University of Puerto Rico - Escuela Graduada de Administración de Empresas (EGAE) ( email )

San Juan, 00918
Puerto Rico

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