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Does Survivorship Bias of Mutual Funds Differ Between Liquidations and Mergers?

Author

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  • Hung-Cheng Lai

    () (Overseas Chinese University)

  • Kuan-Min Wang

    () (Overseas Chinese University)

Abstract

The performance of mutual funds may be misleading due to survivorship bias if the fund family tends to liquidate or merge funds. This paper suggests that funds subject to liquidations and mergers may differ in nature; therefore, this study distinguishes between the two activities. This paper examines whether survivorship bias differs according to whether a fund is liquidated or merged and explores the consequent implications. The empirical results show that Taiwanese equity funds have a survivorship bias of 1.056% annually. After eliminating the merged funds from the sample, we find that fund liquidation is related to performance. This indicates that the factors determining the liquidation and merger of mutual funds have significantly different impacts on the survivorship bias of these funds.

Suggested Citation

  • Hung-Cheng Lai & Kuan-Min Wang, 2016. "Does Survivorship Bias of Mutual Funds Differ Between Liquidations and Mergers?," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 2(4), pages 299-314.
  • Handle: RePEc:eeb:articl:v:2:y:2016:n:4:p:299-314
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    References listed on IDEAS

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    Cited by:

    1. Silvio John Camilleri & Ritienne Farrugia, 2018. "The Risk-Adjusted Performance of Alternative Investment Funds and UCITS: A Comparative Analysis," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(7), pages 1-23, July.

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    Keywords

    mutual fund; survivorship bias; liquidation; merger;

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