The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Evaluating Mutual Fund Performance
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00397
S. P. Kothari, Jerold B. Warner
We study standard mutual fund performance measures, using simulated funds whose characteristics mimic actual funds. We find that performance measures used in previous mutual fund research have little ability to detect economically large magnitudes (e.g., three percent per year) of abnormal fund performance, particularly if a fund's style characteristics differ from those of the value‐weighted market portfolio. Power can be substantially improved, however, using event‐study procedures that analyze a fund's stock trades. These procedures are feasible using time‐series data sets on mutual fund portfolio holdings.
Sensitivity of Multivariate Tests of the Capital Asset‐Pricing Model to the Return Measurement Interval
Published: 09/01/1993 | DOI: 10.1111/j.1540-6261.1993.tb04767.x
PUNEET HANDA, S. P. KOTHARI, CHARLES WASLEY
The capital asset‐pricing model's (CAPM) primary empirical implication is a positively sloped linear relation between a security's expected rate of return and its relative risk (beta). Recent research indicates that inferences about the risk‐return relation are sensitive to the choice of the return measurement interval. We perform multivariate tests of the Sharpe‐Lintner CAPM using monthly and annual returns on market‐value‐ranked portfolios. The CAPM is rejected using monthly returns, a result consistent with previous research. In contrast, we fail to reject the CAPM when annual holding period returns are used.
Another Look at the Cross‐section of Expected Stock Returns
Published: 03/01/1995 | DOI: 10.1111/j.1540-6261.1995.tb05171.x
S. P. KOTHARI, JAY SHANKEN, RICHARD G. SLOAN
Our examination of the cross‐section of expected returns reveals economically and statistically significant compensation (about 6 to 9 percent per annum) for beta risk when betas are estimated from time‐series regressions of annual portfolio returns on the annual return on the equally weighted market index. The relation between book‐to‐market equity and returns is weaker and less consistent than that in Fama and French (1992). We conjecture that past book‐to‐market results using COMPUS‐TAT data are affected by a selection bias and provide indirect evidence.