Mutual Fund Performance and Investment Horizon

Francis In and Sangbae Kim
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Francis In: Monash University, Australia
Sangbae Kim: Kyungpook National University, Korea

Chapter 9 in An Introduction to Wavelet Theory in Finance:A Wavelet Multiscale Approach, 2012, pp 161-175 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThis chapter examines the relative rankings of mutual fund performance at different investment horizons, with a particular focus on the Sharpe ratio. This study is important because the difference between the investment horizons of investors and the performance evaluation periods of mutual fund managers can generate suboptimal investment decisions for mutual fund investors. To this end, we utilize the wavelet multiscaling approach. Our empirical results show that all Sharpe ratios at multiple investment horizons display a very high rank correlation with respect to the Sharpe ratio at the 1-day investment horizon, implying that it matters little which investment horizon is used to assess the performance of mutual funds. This result is supported by five robustness tests.

Keywords: Wavelets; Finance; Economics; Wavelet Analysis; Multiscaling Method (search for similar items in EconPapers)
Date: 2012
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