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Mutual Fund Performance Evaluation and Best Clienteles

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  • Chrétien, Stéphane
  • Kammoun, Manel

Abstract

This paper investigates investor disagreement and clientele effects in performance evaluation by developing a measure that considers the best potential clienteles of mutual funds. In an incomplete market under law-of-one-price (LOP) and no-good-deal conditions, we obtain an upper bound on admissible performance measures that identifies the most favorable alpha. Empirically, we find that a reasonable investor disagreement leads to generally positive performance for the best clienteles. Performance disagreement by investors can be significant enough to change the average evaluation of mutual funds from negative to positive, depending on the clienteles.

Suggested Citation

  • Chrétien, Stéphane & Kammoun, Manel, 2017. "Mutual Fund Performance Evaluation and Best Clienteles," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(4), pages 1577-1604, August.
  • Handle: RePEc:cup:jfinqa:v:52:y:2017:i:04:p:1577-1604_00
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    Cited by:

    1. Fletcher, Jonathan, 2021. "Evaluating the performance of U.S. international equity closed-end funds," Journal of Multinational Financial Management, Elsevier, vol. 60(C).
    2. Fletcher, Jonathan, 2018. "Bayesian tests of global factor models," Journal of Empirical Finance, Elsevier, vol. 48(C), pages 279-289.
    3. Jonathan Fletcher, 2022. "Exploring the diversification benefits of US international equity closed-end funds," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(3), pages 297-320, September.
    4. Fletcher, Jonathan, 2019. "Model comparison tests of linear factor models in U.K. stock returns," Finance Research Letters, Elsevier, vol. 28(C), pages 281-291.

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