Benchmark-adjusted performance of US equity mutual funds and the issue of prospectus benchmarks
| Autor: | Irina B. Mateus, Natasa Todorovic, Cesario Mateus |
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| Rok vydání: | 2019 |
| Předmět: |
040101 forestry
050208 finance Information Systems and Management Actuarial science business.industry Strategy and Management 05 social sciences Equity (finance) 04 agricultural and veterinary sciences HG Quartile 0502 economics and business Prospectus 0401 agriculture forestry and fisheries Business Business and International Management Financial services Risk management |
| Zdroj: | Journal of Asset Management. 20:15-30 |
| ISSN: | 1479-179X 1470-8272 |
| DOI: | 10.1057/s41260-018-0101-z |
| Popis: | This study examines the impact of mismatch between prospectus benchmark and fund objectives on benchmark-adjusted fund performance and ranking in a sample of 1281 US equity mutual funds. All funds in our sample report S&P500 index as a prospectus benchmark, yet 2/3 of those are placed in the Morningstar category with risk and objectives different to those of the S&P500 index. We identify more appropriate ‘category benchmarks’ for those mismatched funds and obtain their benchmark-adjusted alphas using recent Angelidis et al. (J Bank Finance 37(5):1759–1776, 2013) methodology. We find that S&P500-adjusted alphas are higher than ‘category benchmark’-adjusted alphas in 61.2% of the cases. In terms of fund quartile rankings, 30% of winner funds lose that status when the prospectus benchmark is substituted with the one better matching their objectives. In the remaining performance quartiles, there is no clear advantage of using S&P 500 as a benchmark. Hence, the prospectus benchmark can mislead investors about fund’s relative performance and ranking, so any reference to performance in a fund’s prospectus should be treated with caution. |
| Databáze: | OpenAIRE |
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