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Efficiency with Costly Information: A Reinterpretation of Evidence from Managed Portfolios

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Author Info
Elton, Edwin J, et al
Abstract

We investigate the informational efficiency of mutual fund performance for the period 1965-84. Results are shown to be sensitive to the measurement of performance chosen. We find that returns on S&P stocks, returns on non-S&P stocks, and returns on bonds are significant factors in performance assessment. Once we correct for the impact of non-S&P assets on mutual fund returns, we find that mutual funds do not earn returns that justify their information acquisition costs. This is consistent with results for prior periods. Coauthors are Martin J. Gruber, Sanjiv Das, and MAtthew Hlavka. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 6 (1993)
Issue (Month): 1 ()
Pages: 1-22
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Handle: RePEc:oup:rfinst:v:6:y:1993:i:1:p:1-22

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  1. Drew, Michael E. & Stanford, Jon D. & Veeraraghavan, Madhu, 2002. "Efficiency with Costly Information: A Study of Australian Wholesale Superannuation Fund Performance," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 32(1), pages 35-47, March. [Downloadable!]
  2. Louis K.C. Chan & Hsiu-Lang Chen & Josef Lakonishok, 1999. "On Mutual Fund Investment Styles," NBER Working Papers 7215, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. J. Annaert & J.K. De Ceuster & W. Van Hyfte, 2002. "The Value of Asset Allocation Advice - Evidence of The Economist’s Quarterly Portfolio Poll," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/160, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  4. Nicolaj Siggelkow, 1998. "Why Focus? A Study of Intra-Industry Focus Effects," Center for Financial Institutions Working Papers 99-13, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  5. Cronqvist, Henrik, 2006. "Advertising and Portfolio Choice," Working Paper Series 2006-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  6. Dariusz Stanko, 2003. "Polish Pension Funds, Does The System Work? Cost, Efficiency and Performance MeasurementIssues," Public Economics 0302001, EconWPA. [Downloadable!]
  7. Malcolm Baker & Lubomir Litov & Jessica A. Wachter & Jeffrey Wurgler, 2004. "Can Mutual Fund Managers Pick Stocks? Evidence from the Trades Prior to Earnings Announcements," NBER Working Papers 10685, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Riccardo Cesari & Fabio Panetta, 1998. "Style, Fees and Performance of Italian Equity Funds," Temi di discussione (Economic working papers) 325, Bank of Italy, Economic Research Department. [Downloadable!]
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  9. John M.R. Chalmers & Roger M. Edelen & Gregory B. Kadlec, . "Mutual fund trading costs," Rodney L. White Center for Financial Research Working Papers 27-99, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
  10. Alfredo Ciriaco Fernández & Rafael Santamaría Aquilué, 2005. "Persistencia de resultados en los fondos de inversión españoles," Investigaciones Economicas, Fundación SEPI, vol. 29(3), pages 525-573, September. [Downloadable!]
  11. Michael K. Berkowitz & Yehuda Kotowitz, 1997. "Management Compensation and the Performance of Mutual Funds," Working Papers berk-97-01, University of Toronto, Department of Economics. [Downloadable!]
  12. Martin T. Bohl, Judith Lischewski and Svitlana Voronkova, 2008. "Does Regulation Hurt Pension Funds' Performance? Evidence from Strongly Regulated Pension Fund Industries," The Institute for International Integration Studies Discussion Paper Series iiisdp247, IIIS. [Downloadable!]
  13. Miguel Martínez Sedano, 2003. "Legal constraints, transaction costs and the evaluation of mutual funds," European Journal of Finance, Taylor and Francis Journals, vol. 9(3), pages 199-218, June. [Downloadable!] (restricted)
  14. Zhi Da & Pengjie Gao & Ravi Jagannathan, 2008. "Informed Trading, Liquidity Provision, and Stock Selection by Mutual Funds," NBER Working Papers 14609, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. John M.R. Chalmers & Roger M. Edelen & Gregory B. Kadlec, 1999. "Transaction-cost Expenditures and the Relative Performance of Mutual Funds," Center for Financial Institutions Working Papers 00-02, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  16. Louis K. C. Chan & Jason Karceski & Josef Lakonishok, 1997. "The Risk and Return from Factors," NBER Working Papers 6098, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Keith Cuthbertson & Dirk Nitzsche & Niall O' Sullivan, 2004. "UK Mutual Fund Performance: Genuine Stock-Picking Ability or Luck," Money Macro and Finance (MMF) Research Group Conference 2004 55, Money Macro and Finance Research Group. [Downloadable!]
  18. Engström, Stefan, 2004. "Does Active Portfolio Management Create Value? An Evaluation of Fund Managers' Decisions," Working Paper Series in Economics and Finance 553, Stockholm School of Economics. [Downloadable!]
  19. Carlos Alves & Victor Mendes, 2004. "Self-Interest on Mutual Fund Management: Evidence from the Portuguese Market," FEP Working Papers 162, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  20. Bruce Costa & Gary Porter, 2003. "Mutual fund managers: Does longevity imply expertise?," Journal of Economics and Finance, Springer, vol. 27(2), pages 224-235, June. [Downloadable!] (restricted)
  21. Engström, Stefan, 2004. "Investment Strategies, Fund Performance and Portfolio Characteristics," Working Paper Series in Economics and Finance 554, Stockholm School of Economics. [Downloadable!]
  22. Olivia S. Mitchell, 1996. "Administrative Costs in Public and Private Retirement Systems," NBER Working Papers 5734, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  23. Olivier Scaillet & Laurent Barras & Russell R. Wermers, 2005. "False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas," Working Papers CEB 05-014.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
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  24. Dariusz Stanko, 2003. "Performance Evaluation of Public Pension Funds: The Reformed Pension System in Poland," Finance 0306002, EconWPA. [Downloadable!]
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