Mutual Fund Performance Measurement with Nonlinear Stochastic Discount Factors

10.6293/AQAFA.2013.11.08

Mohamed A. Ayadi；Lawrence Kryzanowski

Nonlinear SDF Models ； Mutual Fund Performance

Advances in Quantitative Analysis of Finance and Accounting

11期（2013 / 12 / 01）

207 - 228

英文

Mutual fund returns exhibit a nonlinear structure due to investment restrictions, and the use of option(-like) and dynamic trading strategies. SDF-based nonlinear risks are priced in the cross-section for Canadian equity mutual funds for 1988-2008. Improvement in the significantly negative unconditional performances for individual funds and portfolios with the use of conditional nonlinear SDF-based benchmarks is altered somewhat with the addition of a pricing restriction on the SDF mean. Risk-adjusted performance is related to management fees and fund (no) loads, and unrelated to fund age and size. These results have implications for the availability of scale economies and levels of competition in Canadian versus other mutual fund markets.

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