Persistent Performance in Corporate-Bond Mutual Funds
We provide a comprehensive evaluation of the performances of corporate-bond mutual funds from 1990 to 2004. On average, funds generate slightly positive abnormal returns before fees and slightly negative abnormal returns after fees. We also find that the top decile of funds over the past year outperform the bottom decile, net of expenses and trading costs, by ten basis points per month over the next four years. This spread is twenty basis points per month for high-yield funds. The persistent performance between winners and losers that we detect is not due to expenses or trading costs and is driven largely by the loser funds continuing to lose. However, we do find evidence of the winners continuing to win for a few months. Moreover, we find that winners are able to generate positive alpha gross of expenses over the next four years, evidencing their skill in trading bonds. Investors do not realize this performance though as the winners net returns are not abnormal, consistent with a competitive equilibrium. We then examine if investors are able to exploit the persistence in performance and find that flows to these funds depend on prior performance and that, for high-yield funds, funds with inflows outperform funds with outflows over the next year. In sum, our findings suggest that some fund managers have an ability to identify misvaluations in the bond market, that variation in skill across managers can be detected using prior performance, and that managers face more rapidly diminishing returns to scale in the high-quality bond market than in the high-yield market. Finally, since the returns of the underlying corporate bonds do not display momentum, it is noteworthy to find evidence of persistence and rewards to chasing past performance since these two findings for equity funds depend heavily on (the confounding influence of) momentum in the underlying stock returns.
Roberto C. Gutierrez Jr. William F. Maxwell Danielle Xu
Lundquist College of Business at the University of Oregon Eller School of Business at the University of Arizona School of Business Administration at Gonzaga University
国际会议
大连
英文
1-55
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）