A Survival Analysis of Australian Equity Mutual Funds

A. Cameron and Anthony Hall

No 94, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: Determining which types of mutual (or managed) investment funds are good financial investments is complicated by potential surbivorship biases. This project adds to a small recent international literature on the patterns and determinants of mutual fund survivorship. We use statistical techniques for survival data that are rarely applied in finance. Of specific interest is the hazard rate of fund closure, which gives the variation over time in the conditional probability of fund closure given fund survival to date. For a sample of 251 retail investment funds in Australia from 1980 to 1999 we identify a hump-shaped hazard function that reaches its maximum after about five or six years, a pattern similar to the UK findings of Lunde, Timmermann and Blake (1999). We also consider the impact of monthly and annual fund performance (gross and relative to a market benchmark). Returns relative to the benckmark are much more important than gross returns, with hgiher relative returns associated with lower hazard of fund closure. There appears to be an asymmetric response to performance, with positive shocks having a larger impact on the hazard rate than negative shocks.

Keywords: mutual funds; survivorship bias; duration analysis; cox regression (search for similar items in EconPapers)
JEL-codes: C14 G14 G23 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2003-06-01
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (8)

Published as: Cameron, A. C. and Hall, A. D., 2003, "A Survival Analysis of Australian Equity Mutual Funds", Australian Journal of Management, 28(2), 209-226.

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Journal Article: A Survival Analysis of Australian Equity Mutual Funds (2003)
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