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A Study Of Evaluations Of Mutual Fund Investment Strategies

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Essays In Decision Making

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Abstract

Evaluations of publicly announced investment strategies of open-end mutual funds were secured from a questionnaire sent to brokers and editors of financial newsletters. Ex Ante evaluations secured in this manner are compared with ex post performance over the period 1984-1988 and rated via data from Morningstar, Inc., and Business Week on mutual fund Performances over this same period. The present study is designed so that separations can be effected between risk and return evaluations and Performance over all pertinent ex ante and ex post pairings. Ex ante evaluations of risk and return are found to be positively correlated—as posited in the finance, decision theory and economics literatures—but their ex post pairings are negatively related. Somewhat surprisingly, ex ante to ex post evaluations of risk are positively correlated while ex ante to ex post evaluations of return are negatively correlated. The source of the ex ante to ex post negative relations is therefore in the return rather than the risk evaluations. This casts additional light on the Bowman Paradox (and related topics) which have been extensively studied in the Strategic management literature. It also adds to these paradoxes and suggests programs for further research in a manner that is discussed in the addendum to this paper.

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Authors and Affiliations

  1. College of Business Administration, The University of Texas at Austin, 78712, Austin, Texas, USA

    Patrick L. Brockell, W. W. Cooper & Timothy W. Ruefli

  2. Department of Business Administration, College of Business Administration & Economics, The Yonsei University, 134 Shinchon-Dong, Seodaemun-Gu, 120-749, Seoul, South Korea

    Ku-Hyuk Kwon

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  1. Patrick L. Brockell
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  2. W. W. Cooper
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  3. Ku-Hyuk Kwon
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  4. Timothy W. Ruefli
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Editors and Affiliations

  1. School of Engineering and Applied Sciences, State University of New York at Buffalo, 412 Bonner Hall, Buffalo, NY, 14260, USA

    Mark H. Karwan

  2. Department of Finance, Erasmus University Rotterdam, P. O. Box 1738, 3000 DR, Rotterdam, The Netherlands

    Jaap Spronk

  3. Helsinki School of Economics and Business Administration, Runeberginkatu 14–16, 00100, Helsinki, Finland

    Jyrki Wallenius

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Brockell, P.L., Cooper, W.W., Kwon, KH., Ruefli, T.W. (1997). A Study Of Evaluations Of Mutual Fund Investment Strategies. In: Karwan, M.H., Spronk, J., Wallenius, J. (eds) Essays In Decision Making. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-60663-2_16

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  • DOI: https://doi.org/10.1007/978-3-642-60663-2_16

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