Evaluating Mutual Fund Performance

摘要

We study study standard mutual fund performance measures, using simulated funds whose characteristics mimic actual funds. We find that performance measures used in previous mutual fund research have little ability to detect economically large magnitudes (e.g., three percent per year) of abnormal fund performance, particu- larly if a fund's style characteristics differ from those of the value-weighted market portfolio. Power can be substantially improved, however, using event-study proce- dures that analyze a fund's stock trades. These procedures are feasible using time- series data sets on mutual fund portfolio holdings.