measuring investment performance with a stochastic parameter regression model abstract this paper develops a generalization of the hildreth and houck 1968 random coefficient model for use in evaluating the macroforecasting ability of portfolio managers most studies have assumed that astute managers ignore the strength of the market trend and create a binary portfolio beta with one value during up markets and a lower value during down markets in contrast this paper examines a model in which the superior manager adjusts beta period by period according to changing market conditions the findings indicate that portfolio managers are not superior macroforecasters

incentives and efficiency in the market for management services a study of canadian mutual funds this paper examines the incentives offered managers of canadian equity mutual funds when their compensation is based upon the market value of the assets they manage although this method of compensation supplies a very weak direct link between performance and the remuneration of managers we show that competition

testing for substitutability in the mackerel market a new method using fractional cointegration abstractthis article seeks to extend knowledge of the mackerel scomber scombrus market in the basque country a region in spain by analysing possible relationships between this and other species with similar characteristics such as the sardine sardina pilchardus the horse mackerel trachurus trachurus and the atlantic chub mackerel scomber colias all of them landed at the ports of the basque country specifically the goal is to learn whether these other species can be considered as mackerel substitutes to that end a fractional cointegration analysis of different series of historical prices is performed using a novel method never before used in studies of this type the results indicate that mackerel have no substitutes and thus form a mono species regional market this implies among other things that their price is not influenced by the prices of other species and this should be taken into account by managers when designing management measures and policies to improve the sustainability of

timing decisions and the behavior of mutual fund systematic risk the investment performance of professionally managed portfolios in general and mutual funds in particular has been the subject of considerable attention in finance fama 9 has suggested that overall portfolio performance be broken down in such a manner that the individual sources of performance can be identified two basic sources are 1 the ability of the portfolio manager to forecast price movements of individual common stocks relative to stocks in general selectivity or microforecasting and 2 the ability to forecast the direction of the stock market relative to fixed income securities timing or macroforecasting

market timing and mutual fund performance an empirical investigation the evaluation of investment performance is of importance for allocating investment funds efficiently and setting appropriate management fees because actively managed mutual funds are an important form of investment in the united states a valid question is whether the active management has achieved a sufficient increase in returns to offset the associated costs of information and transactions as well as the management fees charged as a corollary the ability to earn superior returns based on superior forecasting ability would be a violation of the efficient markets hypothesis and would have far reaching implications for the theory of finance 2 henriksson and merton 1981 present statistical techniques for testing forecasting ability with a particular emphasis on the market timing ability of investment managers the tests are derived from the basic model of market timing developed by merton 1981 where the forecaster predicts when stocks will outperform riskless securities and when riskless securities will outperform stocks but does not predict the magnitude of the relative returns the evaluation of the performance of investment managers is a topic of considerable interest to practitioners and academics alike using both the parametric and nonparametric tests for the evaluation of forecasting ability presented by henriksson and merton the market timing ability of 116 open end mutual funds is evaluated for the period 1968 80 the empirical results do not support the hypothesis that mutual fund managers are able to follow an investment strategy that successfully times the return on the market portfolio

searching for price parity in the european whitefish market the purpose of this paper is to test for price parity across different species of whitefish in the european union price parity is defined by a system of cointegrated prices and would be evidence of a single european market for whitefish whitefish are of interest because eu fishers receive the largest share of their income from these fish species notwithstanding the single market policy of the eu by establishing national and regional associations to stabilize or increase the local price of fish fishers operate as if the european market is made up of separate submarkets with price being determined largely within each submarket if whitefish markets were price cointegrated such associations would be largely ineffective in that case what are required are regulations that encompass the european market

performance evaluation of market timers theory and evidence previous investigators have shown that the sharpe measure of the performance of a managed portfolio may be flawed when the portfolio manager has market timing ability herein we develop the exact conditions under which the sharpe measure will completely and correctly order market timers according to ability the derived conditions are neces sary sufficient and observable we compare these derived conditions to empirical esti mates of actual market conditions and find that under typical market conditions the prac tice of using quarterly portfolio return data will frequently result in a failure of the sharpe measure to order timers according to ability we show however that such failures can be greatly reduced by more frequent sampling of managed portfolio returns

fuzzy multi criteria decision making for evaluating mutual fund strategies investors often need to evaluate investment strategies according to their own subjective preferences based upon various criteria this situation can be regarded as a fuzzy multiple criteria decision making fmcdm problem the purpose of this study is to propose an fmcdm approach with fuzzy integral this approach relaxes the independence assumption among criteria for the evaluation of the multiple criteria decision making mcdm problems which is oftentimes the basic assumption in applying hierarchical system for evaluating the strategies of selecting investment style we also employ triangular fuzzy numbers tfns to represent the decision makers subjective preferences on the criteria as well as for the criteria measurements to evaluate mutual funds investment style to achieve this objective first we employ factor analysis to extract four independent common factors from those criteria second we construct the evaluation frame using hierarchical system composed of four common factors with 16 evalu

when is efficiency separable from distribution in the provision of club goods abstract using the homogeneous of degree zero inverse congestion quality function employed most frequently in the literature we characterise completely the families of utility functions which are then necessary and sufficient for break even utilitarian welfare maximising provision of club goods with self selection to be separable from distribution two types of separation involving alternatively a the price and quality b the price quality facility size and total utilisation are considered when separation is possible utility functions and optimal decisions take simple intuitive forms our results extend the scope of separation results previously obtained only for pure public goods journal of economic literature classification numbers d62 h23 h40

long run price flexibilities for high valued uk fish species a cointegration systems approach in this paper the own and cross price flexibilities for four high valued species bass lobster sole and turbot landed in the uk are estimated system of equation models were developed using the vector error correction model vecm approach johansen s multivariate approach was used to obtain estimates of the long run steady state relationship vectors between fish prices and landings to find unique vectors i e no interdependent vectors zero restrictions on the coefficients of the price variables were applied so that the model effectively contained quantity independent variables only the resulting vectors were four unique cointegration long run relationships of monthly fish prices and landings various tests suggested that the variables were i 1 nonstationary variables the model also suggested that there are more than one cointegration vectors relationships between the variables it was found that bass has the largest absolute long run own price flexibility bass and lobster were found to be

product aggregation market integration and relationships between prices an application to world salmon markets relationships between prices of goods offer motives of interest in at least two areas market integration and product aggregation there is a close relationship between market integration and aggregation which may increase the usefulness of market integration studies in this article these relationships are developed and illustrated by an application to the world salmon market it is shown that the law of one price holds for an international market with five salmon species this result has significant implications for the world salmon market regarding both product aggregation in demand analyses and international trade policy

assessing and valuing the non linear structure of hedge fund returns several studies have put forward the non linear structure and option like features of returns associated with hedge fund strategies the authors provide a statistical methodology to test for such non linear features with the returns on any benchmark portfolio they estimate the portfolio of options that best approximates the returns of a given hedge fund account for this search in the statistical testing of the contingent claim features and test whether the identi ed non linear features have a positive value the authors nd that not all categories of funds exhibit signi cant non linearities and that only a few strategies as a group provide signi cant value to investors individual funds may still provide value in

hot hands in mutual funds short run persistence of relative performance 1974 1988 the relative performance of no load growth oriented mutual funds persists in the near term with the strongest evidence for a one year evaluation horizon portfolios of recent poor performers do significantly worse than standard benchmarks those of recent top performers do better though not significantly so the difference in risk adjusted performance between the top and bottom octile portfolios is six to eight percent per year these results are not attributable to known anomalies or survivorship bias investigations with a different previously used data set and with some post 1988 data confirm the finding of persistence

what is benefit taxation abstract benefit taxation is a system in which individuals are taxed according to the benefits they receive from public expenditures this paper describes an alternative to the standard lindahl method of determining the distribution of individual benefits from government provided public goods and uses this alternative to calculate benefit taxes this alternative avoids some of the paradoxial features of lindahl pricing and generates outcomes in which all consumers benefit from reduced costs of providing public goods an illustrative calculation shows that benefit taxes defined in this way may be quite regressive

a theory of optimal timing and selectivity abstract we solve an extended optimal portfolio problem in continuous time for any horizon where we allow the mean and variance of returns to be stochastic introduce fund flows to and from the portfolio permit differential investor preferences for dividend versus growth stocks and allow the investor to buy costly information on the random mean and variance of the portfolio to improve his portfolio choice set this model provides analytical results especially useful in understanding the expenditure on timing and selection information a mutual fund undertakes in attempting to improve performance relative to a benchmark we examine this proposition for growth and income funds long and short investment horizons and also account for fund inflows and outflows we also combine our model of costly learning with the traditional model of incomplete information to understand the interaction between costly and costless learning the approach taken is a purely theoretical one and in this regard the paper is normative in spirit we anticipate that the propositions in this paper will provide two byproducts i a framework for fund managers to think about how to allocate information expenses between timing and selection skills and ii give academics especially empirical researchers a theoretical backdrop against which to examine the mutual fund industry

market provision of price excludable public goods a general analysis the demand distribution is employed as a novel and powerful basis for analyzing monopoly provision of price excludable public goods and could be used to analyze other market structures or in some circumstances private goods provision for uniform per unit all or none two part and multipart pricing we identify characteristics of revenue functions relative profitability and operational procedures for selecting price output levels under all these strategies rationing of some consumers by output is required and a positive price output relationship may arise in general the revenue ranking of pricing strategies is sensitive to the distribution of demand and though multipart pricing can be expected to be revenue dominant uniform per unit pricing emerges as a surprisingly robust strategy even before operational complexity is fully taken into account

market timing selectivity and mutual fund performance an empirical investigation this article empirically examines market timing and selectivity performance of a sample of mutual funds it uses a very simple regression technique to separate stock selection ability from timing ability this technique first suggested by treynor and mazuy and later refined by bhattacharya and pfleiderer uses a modified security market line approach to produce individual measures of timing and stock selection ability the inputs to the model are only the returns earned on the fund and those earned on the market portfolio the empirical results indicate that at the individual fund level there is some evidence of superior micro and macroforecasting ability on the part of the fund manager copyright 1990 by the university of chicago

uk unit trust performance 1980 1989 a passive time varying approach abstract this paper indirectly tests the efficient markets hypothesis by analysing the performance of 30 authorised unit trusts from 1980 through 1989 the risk return relationship of the funds is allowed to vary in a generalised manner thus allowing for passive structural change in underlying economic relationships our findings suggest that 21 of the 30 trusts in the sample were able to supply investment opportunities to the individual investor which were superior to a buy and hold strategy

stable classes of technical trading rules technical analysis includes a huge variety of trading rules this fact has always been a serious hindrance to the large number of market efficiency studies implemented either to demonstrate the profitability of market beating systems or to deny their operational feasibility for evident reasons it is practically impossible and theoretically weak to systematically analyse the entire body of all trading rules we therefore propose a novel method to form natural classes of trading rules which are found to be robust to changing market scenarios in particular groups are formed adopting a similarity measure based on the investing signals of the trading rules our clustering methodology adopts a markov chain bootstrapping technique to generate differentiated scenarios preserving volume and price joint distributional features an application is developed on a sample of 674 trading rules results show that six groups here identified as trading styles are sufficient to explain the large portion of the investing

a reexamination of the market timing and security selection performance of mutual funds an extended and correctly specified version of the treynor mazuy tm model is used to examine the market timing and stock selection abilities of domestic equity mutual funds this extended model controls for the inclusion of non s p 500 assets in mutual fund portfolios we document positive and significant market timing abilities for 633 mutual funds during the 1984 94 period this finding is in sharp contrast to the negative market timing abilities found when using the original tm model which does not control for non s p 500 assets security selection abilities are significantly positive and cross sectional correlations between market timing and selectivity are significantly negative the monotonic correlation between turnover and market timing is positive and that between turnover and selectivity is negative neither of these findings is evident with the original tm model or with traditional linear parametric measures of correlation

global hedge funds risk return and market timing we examined the performance of 115 global equity based hedge funds with reference to their target geographical markets in the seven year period 1994 2000 several results are noteworthy first global hedge fund managers do not show positive market timing ability but do demonstrate superior security selection ability the jensen s alphas we found before and after controlling for market timing are sizable and positive second incentive fees and leverage both have a significant positive impact on a hedge fund s risk adjusted return as demonstrated by sharpe ratios and jensen s alphas but not on a fund s selectivity index i e its performance after controlling for market timing effects third incentive fees can lower the hedge fund s up market and down market systematic risk fourth the size of a hedge fund is consistently related to its return performance finally contrary to the general perception leverage does not significantly affect the systematic risk of hedge funds