Research output per year
Research output per year
Irina Bezhentseva Mateus, Cesario Mateus, Natasa Todorovic
Research output: Contribution to journal › Journal article › Research › peer-review
This study examines the impact of mismatch between prospectus benchmark and fund objectives on benchmark-adjusted fund performance and ranking in a sample of 1281 US equity mutual funds. All funds in our sample report S&P500 index as a prospectus benchmark, yet 2/3 of those are placed in the Morningstar category with risk and objectives different to those of the S&P500 index. We identify more appropriate ‘category benchmarks’ for those mismatched funds and obtain their benchmark-adjusted alphas using recent Angelidis et al. (J Bank Finance 37(5):1759–1776, 2013) methodology. We find that S&P500-adjusted alphas are higher than ‘category benchmark’-adjusted alphas in 61.2% of the cases. In terms of fund quartile rankings, 30% of winner funds lose that status when the prospectus benchmark is substituted with the one better matching their objectives. In the remaining performance quartiles, there is no clear advantage of using S&P 500 as a benchmark. Hence, the prospectus benchmark can mislead investors about fund’s relative performance and ranking, so any reference to performance in a fund’s prospectus should be treated with caution.
Original language | English |
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Journal | Journal of Asset Management |
Volume | 20 |
Issue number | 1 |
Pages (from-to) | 15-30 |
Number of pages | 16 |
ISSN | 1470-8272 |
DOIs | |
Publication status | Published - 4 Feb 2019 |
Externally published | Yes |
Research output: Contribution to journal › Journal article › Research › peer-review