An Intertemporal CAPM Approach to Evaluate Mutual Fund Performance

An Intertemporal CAPM Approach to Evaluate Mutual Fund Performance Merton (1973) and Campbell (1993) have demonstrated that if an investor anticipates information shifts, he will adjust his portfolio choice today in an attempt to hedge these shifts. Exploiting these insights, we construct a new performance measure to evaluate fund managers' hedging ability. This new measure is different from two widely adopted performance evaluation measures: securities selectivity and market timing. Moreover, an econometric methodology is developed to simultaneously estimate the magnitudes of these three portfolio performance evaluation measures. The results show that mutual fund managers are on average with positive security selection and negative market timing ability. Furthermore, the mutual funds with investment style classified as “Asset Allocation” generally have positive hedging timing ability. Review of Quantitative Finance and Accounting Springer Journals

An Intertemporal CAPM Approach to Evaluate Mutual Fund Performance

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Kluwer Academic Publishers
Copyright © 2003 by Kluwer Academic Publishers
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
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  • On Timing and Selectivity
    Admati, A. R.; Bhattacharya, S.; Pfleiderer, P.

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