Skip to main content

Research Repository

Advanced Search

Investor learning and mutual fund family

Zhang, Z.; Ding, L.; Zhou, S.

Investor learning and mutual fund family Thumbnail


Authors

S. Zhou



Abstract

In this paper we revisit the cross-fund learning method suggested by Jones and Shanken (2005) and construct a linear hierarchical model to consider the learning across funds within the fund family during the performance evaluation. We provide a full Bayesian treatment on all the factors of the pricing model and allow both the fund family and the individual manager to have dependent prior information regarding funds' alphas. The simulation results suggest that returns from peer funds within the family significantly affect investors' updating on fund alphas since the posterior distribution on fund alphas experiences a faster shrinkage than those reported in the previous literature. The model can also be simulated with specific prior belief on different factors of the pricing model, i.e. fund alphas, betas and factor loadings of each pricing benchmark, to better address the learning issue.

Citation

Zhang, Z., Ding, L., & Zhou, S. (2014). Investor learning and mutual fund family. Journal of Empirical Finance, 26, 171-188. https://doi.org/10.1016/j.jempfin.2013.12.001

Journal Article Type Article
Acceptance Date Dec 4, 2013
Online Publication Date Dec 13, 2013
Publication Date Mar 1, 2014
Deposit Date Dec 10, 2013
Publicly Available Date Mar 29, 2024
Journal Journal of Empirical Finance
Print ISSN 0927-5398
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 26
Pages 171-188
DOI https://doi.org/10.1016/j.jempfin.2013.12.001
Keywords Mutual fund, Performance, Bayesian analysis, Hierarchical model.
Public URL https://durham-repository.worktribe.com/output/1446163

Files

Accepted Journal Article (865 Kb)
PDF

Copyright Statement
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Empirical Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Empirical Finance, 26, 2014, 10.1016/j.jempfin.2013.12.001.





You might also like



Downloadable Citations