Performance measurement with selectivity, market and volatility timing

Wayne Ferson and Haitao Mo

Journal of Financial Economics, 2016, vol. 121, issue 1, 93-110

Abstract: The performance of portfolio managers depends on market timing, volatility timing, and security selection. We develop holdings-based performance measures that adjust for risk using stochastic discount factors, display all three components in a consistent framework, and avoid strong assumptions about managers’ behavior. Previous models leave out some of the components of performance, and correcting for this we deliver better measures of selectivity. Sorting stocks held by funds on selectivity produces a quintile spread in four-factor alphas greater than 2.5% per year before costs and more than 1.7% greater than found using the Daniel, Grinblatt, Titman, and Wermers (1997) measure.

Keywords: Mutual funds; Performance measurement; Stochastic discount factor; Market timing; Volatility (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X16300125
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:121:y:2016:i:1:p:93-110

DOI: 10.1016/j.jfineco.2016.02.012

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().