Determinants of Performance for Mortgage‐Backed Securities Funds

Determinants of Performance for Mortgage‐Backed Securities Funds This article examines the performance of mortgage‐backed securities (MBS) mutual funds from January 1987 to June 1995. As a group, the MBS mutual funds underperform both the Salomon and Lehman Brothers MBS market benchmarks. The relative underperformance of the MBS mutual funds is due to poor securities selection and timing decisions. Fund expenses also contribute significantly to the underperformance, while fund load, turnover, management fees and other fund characteristics do not materially affect performance. The underperformance is found to be concentrated in several exceptionally bad months during the sample period. Testing indicates that the MBS mutual funds underperform the MBS benchmark during months of rising interest rates, but match the MBS benchmark during months of falling interest rates. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Real Estate Economics Wiley

Determinants of Performance for Mortgage‐Backed Securities Funds

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Publisher
Wiley
Copyright
Copyright © 1997 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1080-8620
eISSN
1540-6229
DOI
10.1111/1540-6229.00732
Publisher site
See Article on Publisher Site

Abstract

This article examines the performance of mortgage‐backed securities (MBS) mutual funds from January 1987 to June 1995. As a group, the MBS mutual funds underperform both the Salomon and Lehman Brothers MBS market benchmarks. The relative underperformance of the MBS mutual funds is due to poor securities selection and timing decisions. Fund expenses also contribute significantly to the underperformance, while fund load, turnover, management fees and other fund characteristics do not materially affect performance. The underperformance is found to be concentrated in several exceptionally bad months during the sample period. Testing indicates that the MBS mutual funds underperform the MBS benchmark during months of rising interest rates, but match the MBS benchmark during months of falling interest rates.

Journal

Real Estate EconomicsWiley

Published: Dec 1, 1997

References

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