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Stale prices and the performance evaluation of mutual funds

Qian, Meijun

Description

Staleness in measured prices imparts a positive statistical bias and a negative dilution effect on mutual fund performance. First, evaluating performance with nonsynchronous data generates a spurious component of alpha. Second, stale prices create arbitrage opportunities for high-frequency traders whose trades dilute the portfolio returns and hence fund performance. This paper introduces a model that evaluates fund performance while controlling directly for these biases. Empirical tests of...[Show more]

CollectionsANU Research Publications
Date published: 2011-04
Type: Journal article
URI: http://hdl.handle.net/1885/112129
Source: Journal of Financial and Quantitative Analysis
DOI: 10.1017/S0022109010000773
Access Rights: Open Access

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