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Another Look at Mutual FundTournaments

Published online by Cambridge University Press:  06 April 2009

Jeffrey A. Busse
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Abstract

Daily retutns are used to examine how mutual fundsactively alter the risk of their portfolios inresponse to past performance. Compared to monthlydata, daily returns produce much more efficientestimates of fund volatility, which give vastlydifferent inferences about the behavior of fundmanagers. In particular, monthly results consistentwith under-performers increasing their risk relativeto better performing funds disappear with dailydata. The differences in the monthly and dailyresults arise from biases in the monthly volatilityestimates attributable to daily returnautocorrelation.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 36 , Issue 1 , March 2001 , pp. 53 - 73
Copyright
Copyright © School of Business Administration, University of Washington 2001

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Footnotes

*

Goizueta Business School, Emory University, 1300Clifton Rd., Atlanta, GA 30322–2722, email: Jeff_Busse@bus.meoty.edu. I especiallyappreciate the helpful comments of Wayne Ferson(associate editor and referee). I also appreciatethe comments of Viral Acharya, Edwin Elton, YoungHo Eom, Martin Gruber, Anthony Lunch, PaulMalatesta (the editor), Lubos Pastor, MatthewRichardson, Charles Trzcinka, University of NorthCarolina, and the 1998 European FinanceAssociation meetings.

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