Representative investors versus best clienteles: Performance evaluation disagreement in mutual funds

Stéphane Chrétien and Manel Kammoun

International Review of Financial Analysis, 2024, vol. 95, issue PB

Abstract: This paper develops a diagnostic tool for candidate performance measures that accounts for investor disagreement in mutual funds. We compare the evaluation for best clienteles, specified by an upper admissible performance bound, to the one for representative investors implicit in eleven models. The results show that linear factor models misrepresent best clientele alphas, with a disagreement that relates to fund characteristics. Consumption-based alphas are generally inadmissible. The manipulation-proof performance measure generates alphas that are sensitive to its risk aversion parameter and lack statistical precision. However, a reasonable parameter gives admissible values that reflect the alphas for the most favorable clienteles.

Keywords: Portfolio performance measurement; Performance disagreement; Performance manipulation; Mutual fund (search for similar items in EconPapers)
JEL-codes: G12 G23 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924004307

DOI: 10.1016/j.irfa.2024.103498

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