English, Article, Journal or magazine article edition: The Hazards of Mutual Fund Underperformance: A Cox Regression Analysis Asger Lunde; Allan Timmermann; David Blake

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The Hazards of Mutual Fund Underperformance: A Cox Regression Analysis
Author
  • Asger Lunde
  • Allan Timmermann
  • David Blake
Physical Description
  • preprint
Notes
  • This paper investigates the process determining mutual funds' conditional probability of closure, i.e. their hazard function. Using a nonparametric approach to estimate the effects of a fund's age on its hazard rate, we find a distinctly nonlinear, inverse U-shaped pattern in the relationship. Hence young and very old funds are least likely to be closed down. A fund's relative performance and (less significantly) the level of return in the sector in which the fund operates are also identified as important factors in the closure decision. Results from semiparametric Cox regressions are compared with those from the discrete choice probit model used by Brown and Goetzmann (1995). Finally, we provide a complete summary of the fund attrition process by estimating the survivor function, indicating the proportion of funds that survive up to a given age, and we identify the effect of fund attrition on standard measures of persistence of fund performance. * University of Aarhus ** Birbeck College, University of London
  • This paper investigates the process determining mutual funds conditional probability of closure, i.e. their hazard function. Using a nonparmetric approach to estimate the effects of a funds age on its hazard rate, we find a distinctly nonlinear, inverse U-shaped pattern in the relationship. Hence young and very old funds are least likely to be closed down. A funds relative performance and (less significantly) the level of return in the sector in which the fund operates are also identified as important factors in the closure decision. Results from semiparametric Cox regressions aaaare compared with those from the discrete choice probit model used by Brown and Goetzmann (1995). Finally, we provide a complete summary of the fund attrition process by estimating the survivor function, indicating the proportion of funds that survive up to a given age, and we identify the effect of fund attrition on standard measure of persistence of fund performance.
  • RePEc:fmg:fmgdps:dp302
  • mutual funds, duration analysis, Cox regression, discrete choice model,
  • RePEc:cdl:ucsdec:1998-11
Language
  • English
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