A Survival Analysis of Australian Equity Mutual Funds
AbstractDetermining which types of mutual (or managed) investment funds are good financial investments is complicated by potential surbivorship biases. This project adds to a small recent international literature on the patterns and determinants of mutual fund survivorship. We use statistical techniques for survival data that are rarely applied in finance. Of specific interest is the hazard rate of fund closure, which gives the variation over time in the conditional probability of fund closure given fund survival to date. For a sample of 251 retail investment funds in Australia from 1980 to 1999 we identify a hump-shaped hazard function that reaches its maximum after about five or six years, a pattern similar to the UK findings of Lunde, Timmermann and Blake (1999). We also consider the impact of monthly and annual fund performance (gross and relative to a market benchmark). Returns relative to the benckmark are much more important than gross returns, with hgiher relative returns associated with lower hazard of fund closure. There appears to be an asymmetric response to performance, with positive shocks having a larger impact on the hazard rate than negative shocks.
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Bibliographic InfoPaper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 94.
Date of creation: 01 Jun 2003
Date of revision:
mutual funds; survivorship bias; duration analysis; cox regression;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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- M. Kabir Hassan & Jung Suk-Yu, 2007. "Rational Speculative Bubbles: An Empirical Investigation of the Middle East and North African Stock Markets," NFI Working Papers 2007-WP-31, Indiana State University, Scott College of Business, Networks Financial Institute.
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