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The perils of performance measurement in the German mutual-fund industry


Böhme, Philipp; Pohl, Walter; Schmedders, Karl (2013). The perils of performance measurement in the German mutual-fund industry. Swiss Finance Institute Research Paper 13-30 , University of Zurich.

Abstract

We document a curious feature of the German mutual fund industry. Unlike U.S. mutual funds, funds domiciled in Germany do not necessarily compute their net asset values (NAV) as of market close. Using a sample of German equity funds, we infer each fund's NAV closing time from the best-fit market model using both maximum likelihood and Bayesian estimation. The results of both approaches coincide perfectly and show that all but one of the funds domiciled in Germany report intraday NAVs. We show that using market returns computed at the end of the day instead of the best-fit time, usually leads to misleading inferences about mutual fund performance.

We document a curious feature of the German mutual fund industry. Unlike U.S. mutual funds, funds domiciled in Germany do not necessarily compute their net asset values (NAV) as of market close. Using a sample of German equity funds, we infer each fund's NAV closing time from the best-fit market model using both maximum likelihood and Bayesian estimation. The results of both approaches coincide perfectly and show that all but one of the funds domiciled in Germany report intraday NAVs. We show that using market returns computed at the end of the day instead of the best-fit time, usually leads to misleading inferences about mutual fund performance.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
JEL Classification:G12, G24
Language:English
Date:17 May 2013
Deposited On:23 Jul 2013 07:08
Last Modified:05 Apr 2016 16:52
Series Name:Swiss Finance Institute Research Paper
Number of Pages:42
Publisher DOI:https://doi.org/10.2139/ssrn.2270618
Official URL:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2270618
Permanent URL: https://doi.org/10.5167/uzh-79452

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