Conditional Performance Evaluation for German Mutual Equity Funds

Bessler, Wolfgang and Drobetz, Wolfgang and Zimmermann, Heinz. (2007) Conditional Performance Evaluation for German Mutual Equity Funds. WWZ Discussion Papers, 2007 (22).

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Official URL: https://edoc.unibas.ch/61231/

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We investigate the performance of a sample of German mutual equity funds over NEWLINE the period from 1994 to 2003. Our general finding is that mutual funds, on average, NEWLINE hardly produce excess returns relative to their benchmark that are large enough to NEWLINE cover their expenses. This conclusion is drawn from a variety of model specifications NEWLINE and is robust to many different benchmarks. Compared to unconditional NEWLINE measures, fund performance substantially deteriorates when we measure conditional NEWLINE alphas both in single-index and multi-factor models. We also measure fund NEWLINE performance in the Euler-equation framework and test several specifications of the NEWLINE stochastic discount factor using GMM. The result that funds underperform even before NEWLINE costs is even more pronounced. Overall, given the fact that stock returns are to NEWLINE some extent predictable by using publicly available information, conditional analysis NEWLINE raises the hurdle for active managers seeking abnormal positive performance, NEWLINE because it gives them no credit for exploiting readily available information.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Finanzmarkttheorie (Zimmermann)
12 Special Collections > WWZ Publications > WWZ Discussion Papers and Working Papers
UniBasel Contributors:Zimmermann, Heinz
Item Type:Working Paper
Publisher:WWZ, University of Basel
Number of Pages:57
Note:Publication type according to Uni Basel Research Database: Discussion paper / Internet publication -- EFM classification codes: 380, 370, 350, 310
Identification Number:
  • handle: RePEc:bsl:wpaper:2007/22
edoc DOI:
Last Modified:09 Mar 2018 10:53
Deposited On:07 Mar 2018 11:35

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