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The Perils of Performance Measurement in the German Mutual-Fund Industry

Author

Listed:
  • Philip Böhme

    (Allianz Global Investors Europe)

  • Walt Pohl

    (NHH Norwegian School of Economics; University of Zurich)

  • Karl Schmedders

    (University of Zurich)

Abstract

We document a curious feature of the German mutual fund industry. Unlike U.S. mutual funds, funds domiciled in Germany do not necessarily compute their net asset values (NAV) as of market close. Using a sample of German equity funds, we infer each fund's NAV closing time from the best-fit market model using both maximum likelihood and Bayesian estimation. The results of both approaches coincide perfectly and show that all but one of the funds domiciled in Germany report intraday NAVs. We show that using market returns computed at the end of the day instead of the best-fit time, usually leads to misleading inferences about mutual fund performance.

Suggested Citation

  • Philip Böhme & Walt Pohl & Karl Schmedders, 2013. "The Perils of Performance Measurement in the German Mutual-Fund Industry," Swiss Finance Institute Research Paper Series 13-30, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1330
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    More about this item

    Keywords

    CAPM regression; Dimson correction; mutual funds; net asset values; performance measurement;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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