CAPM and the Duration of Poorly Performing Mutual Funds

Alex Keenan ()
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Alex Keenan: Rutgers

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: Using duration analysis and CAPM, this paper seeks to estimate the length of time performance measures affect the probability of a mutual fund liquidating. Data was collected on small cap growth funds from 1980-Nov. 2000 using the Sharpe Ratio to estimate the probability that a mutual fund closes due to poor performance. Using a parametric approach the results show that a fund with a lower Sharpe ratio as well as overall strong performance by the market increases the probability of a fund's failure. The results also show the existence of positive duration implying older funds face a higher probability of failure. The results are then compared to other models to test the appropriateness of the model.

Keywords: mutual funds (search for similar items in EconPapers)
Date: 2001-06-18
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200104

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