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Performance evaluation of mutual fund investments: The impact of non-normality and time-varying volatility

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  • Ioannis D Vrontos

    (Athens University of Economics and Business)

  • Loukia Meligkotsidou
  • Spyridon D Vrontos

Abstract

Extending previous work on mutual fund pricing, this article introduces the idea of modeling the conditional distribution of mutual fund returns using a fat tailed density and a time-varying conditional variance. This approach takes into account the stylized facts of mutual fund return series, that is heteroscedasticity and deviations from normality. We evaluate mutual fund performance using multifactor asset pricing models, with the relevant risk factors being identified through standard model selection techniques. We explore potential impacts of our approach by analyzing individual mutual funds and show that it can be economically important.

Suggested Citation

  • Ioannis D Vrontos & Loukia Meligkotsidou & Spyridon D Vrontos, 2011. "Performance evaluation of mutual fund investments: The impact of non-normality and time-varying volatility," Journal of Asset Management, Palgrave Macmillan, vol. 12(4), pages 292-307, September.
    • Handle: RePEc:pal:assmgt:v:12:y:2011:i:4:d:10.1057_jam.2011.23
    DOI: 10.1057/jam.2011.23
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    3. Kalima, Bwalya & Gopane, Thabo, 2022. "Portfolio performance under dynamic systematic risk and conditional betas: The South African unit trust market," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 66, pages 85-98.

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