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Legal constraints, transaction costs and the evaluation of mutual funds

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  • Miguel Martinez Sedano

Abstract

The paper considers the legal restrictions on investment and the transaction costs related to optimal turnover that affect mutual funds. A method is developed for mutual fund performance evaluation when both these factors are included in the reference portfolios, and it is applied to a sample of available Spanish mutual funds. The poor performance results reflected in previous studies are not significantly modified. However, when net returns on the reference portfolios are used in the evaluation the performance is clearly improved.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/13518470010011260
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

Volume (Year): 9 (2003)
Issue (Month): 3 ()
Pages: 199-218

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Handle: RePEc:taf:eurjfi:v:9:y:2003:i:3:p:199-218

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Related research

Keywords: legal restrictions; transaction costs; net returns; reference portfolio; performance;

References

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  1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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  16. Gendron, Michel & Genest, Christian, 1990. " Performance Measurement under Asymmetric Information and Investment Constraints," Journal of Finance, American Finance Association, vol. 45(5), pages 1655-61, December.
  17. Warther, Vincent A., 1995. "Aggregate mutual fund flows and security returns," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 209-235.
  18. Grinblatt, Mark & Titman, Sheridan, 1994. "A Study of Monthly Mutual Fund Returns and Performance Evaluation Techniques," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(03), pages 419-444, September.
  19. Ferson, Wayne E & Schadt, Rudi W, 1996. " Measuring Fund Strategy and Performance in Changing Economic Conditions," Journal of Finance, American Finance Association, vol. 51(2), pages 425-61, June.
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Cited by:
  1. Gil Bazo, Javier & Martínez Sedano, Miguel Angel, 2003. "The Black Box of Mutual Fund Fees," DFAEII Working Papers 2004-01, University of the Basque Country - Department of Foundations of Economic Analysis II.

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