GET 2005/06: mutual funds

· Data on PIFs (to be edited and updated):

o Daily data on NAV and TNA in 1999-2003, 2004, and 2005

o Fund characteristics, as of end 2003

General readings

Required:

· Haugen, Modern Investment Theory, ch. 11-12. Basics of performance evaluation.

· Grinblatt and Titman, Performance evaluation (Ch. 19 in the Handbook on Finance). Review of the return-based and characteristic-based approaches to performance evaluation.

· Goriaev, 2002, On the behavior of mutual fund investors and managers, Ph.D. Dissertation, Chapters 1-2. Basic information about the structure of the mutual fund industry and introduction to the literature on mutual funds.

· Gruber, 1996, Another puzzle: The growth in actively managed mutual funds, Journal of Finance 51, 783-810. Broad view on several research issues in the literature on mutual funds, including performance persistence, performance chasing (flow-performance relationship), and smart money effect (predictive power of flows). The main question is why active mutual funds grow so fast despite unimpressive average performance.

Additional:

· Wermers, 2000, Mutual fund performance: An empirical decomposition into stock-picking talent, style, transactions costs, and expenses, Journal of Finance 55, 1655-1695. Portfolio-based approach to mutual fund performance measurement.

· DeRoon and Nijman, 2001, Testing for mean-variance spanning: A survey, Journal of Empirical Finance 8/2, 111-156, a survey of mean-variance spanning tests.

· Kiselev, Kapitan, and Kokorev, A note on Russian PIFs.

· Russian federal law on PIFs.

Readings for selected topics

Fund performance and ratings

· Ferson and Schadt, 1996, Measuring fund strategy and performance in changing economic conditions, Journal of Finance 51, 425-461. Conditional approach to performance measurement.

· Kosowski, Timmermann, Wermers, and White, 2005, Can Mutual Fund 'Stars' Really Pick Stocks? New Evidence from a Bootstrap Analysis.

· Mamaysky, Spiegel, and Zhang, 2005, Improved Forecasting of Mutual Fund Alphas and Betas.

· Stutzer, 2005, Mutual Fund Ratings: What is the Risk in Risk-Adjusted Fund Returns?

Performance persistence

· Brown and Goetzmann, 1995, Performance persistence, Journal of Finance 50, 679-698. Analysis of performance persistence, controlling for the cross-correlation and survivor bias.

· Carhart, 1997, On persistence in mutual fund performance, Journal of Finance 52, 57-82. Classic analysis of mutual fund performance persistence on the basis of a four-factor model.

· Teo and Woo, 2004, Style effects in the cross-section of stock returns, Journal of Financial Economics 74, 367-398.

· Bollen and Busse, 2004, Short-term Persistence in Mutual Fund Performance, Review of Financial Studies 18.

Determinants of mutual fund flows

· Sirri and Tufano, 1998, Costly search and mutual fund flows, Journal of Finance 53, 1589-1622.

· Chevalier and Ellison, 1997, Risk Taking by Mutual Funds as a Response to Incentives, Journal of Political Economy 105, 1167-1200. Estimating the flow-performance relationship using the semi-parametric methodology.

Measuring timing ability

· Ferson and Schadt, 1996, Measuring fund strategy and performance in changing economic conditions, Journal of Finance 51, 425-461. Conditional approach to performance measurement (including market timing measures).

· Goetzmann, Ingersoll, and Ivkovic, 2000, Monthly measurement of daily timers, Journal of Financial and Quantitative Analysis 35, 257-290.

Style analysis

· Brown and Goetzmann, 1997, Mutual fund styles, Journal of Financial Economics 43, 373-399.

· TerHorst, 2004, Evaluating style analysis, Journal of Empirical Finance 11, 29-53.

Bayesian approach to performance evaluation

· Pastor and Stambaugh, 2002, Investing in equity mutual funds, Journal of Financial Economics 63, 351-380.

Aggregate fund flows and sentiment factor

· Brown, Goetzmann, Hiraki, Shiraishi, and Watanabe, 2002, Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows.

Risk-taking behavior

· Chevalier and Ellison, 1997, Risk Taking by Mutual Funds as a Response to Incentives, Journal of Political Economy 105, 1167-1200. Estimating the flow-performance relationship, resulting risk-taking incentives for mutual funds, and response to these incentives by fund managers.

· Busse, 2001, Another Look at Mutual Fund Tournaments, Journal of Financial and Quantitative Analysis 36(1), 53-73.

Master theses

· Barinov, 2003, Measuring performance of Russian equity funds.

· Kobelev, 2004, Performance evaluation of Russian mutual funds.

· Chan