Connor, Gregory and Korajczyk, Robert (1991) The Attributes, Behavior, and Performance of U.S. Mutual Funds. Review of Quantitative Finance and Accounting, 1. pp. 5-26. ISSN 0924-865X

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Abstract

This article examines the risk and return characteristics of U.S. mutual funds. We employ an equilibrium version of the Arbitrage Pricing Theory (APT) and a principal-components-based statistical technique to identify performance benchmarks. We also consider the Capital Asset Pricing Model (CAPM) as an alternative. We implement a procedure for overcoming the rotational indeterminacy of factor models. This procedure is a hybrid of statistical factor estimation and prespecification of factors. We estimate measures of timing ability for the CAPM and extend it to the APT. We find that this timing test is misspecified due to noninformation-based changes in mutual fund betas. We develop a modification of the timing measure that, under certain conditions, distinguishes true timing ability from noninformation-based beta changes.

Item Type:	Article
Keywords:	U.S. mutual funds; Arbitrage Pricing Theory; Capital Asset Pricing Model; rotational indeterminacy;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	12784
Depositing User:	Gregory Connor
Date Deposited:	21 Apr 2020 10:24
Journal or Publication Title:	Review of Quantitative Finance and Accounting
Publisher:	Kluwer Academic Publisher
Refereed:	Yes
URI:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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