Rankings for Australian managed funds: Contrariness and performance index failure

Mike Dempsey
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Mike Dempsey: Faculty of Business and Economics, PO Box 197, Monash University

Journal of Asset Management, 2009, vol. 10, issue 3, No 2, 138-157

Abstract: Abstract This paper examines the persistence of return performance for Australian managed funds. Our first finding is that return performance is unstable, with a strong tendency for top-performing funds to become bottom-performing funds, and vice versa. Our second finding is that the classical measures of fund performance (Sharpe and Treynor indices) provide a more stable measure of performance, but, significantly, that such stability results from the inherent insensitivity of the performance measures to either improvements or deteriorations in a fund's return performance. We thereby are led to question the insightfulness of these standard performance indices. In seeking to clarify these issues, we apply both a Spearman rank correlation and an innovative Bayesian approach in rating Australian funds over the period between 1998 and 2004.

Keywords: fund rankings; Bayesian analysis; Sharpe index (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/jam.2009.8

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