Rating mutual funds

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Rating mutual funds

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dc.contributor.author Bechmann, Ken L. en_US
dc.contributor.author Rangvid, Jesper en_US
dc.date.accessioned 2009-02-04T10:26:21Z
dc.date.available 2009-02-04T10:26:21Z
dc.date.issued 2005-11-21T00:00:00Z en_US
dc.identifier.isbn 8790705971 en_US
dc.identifier.uri http://hdl.handle.net/10398/7194
dc.description.abstract We develop a new rating of mutual funds: the atpRating. The atpRating assigns crowns to each individual mutual fund based upon the costs an investor pays when investing in the fund in relation to what it would cost to invest in the fund’s peers. Within each investment category, the rating assigns five crowns to funds with the lowest costs and one crown to funds with the highest costs. We investigate the ability of the atpRating to predict the future performance of a fund. We find that an investor who has invested in the funds with the lowest costs within an investment category would have obtained an annual risk-adjusted excess return that is approximately 3-4 percentage points higher per annum than if the funds with the highest costs had been invested in. We compare the atpRating with the Morningstar Rating. We show that one reason why the atpRating and the Morningstar Rating contain different information is that the returns Morningstar uses as inputs when rating funds are highly volatile whereas the costs the atpRating uses as inputs when rating funds are highly persistent. In other words, a fund that has low costs one year will most likely also have low costs the following year, whereas the return of a fund in a certain year generally contains only little information about the future return that the fund will generate. Finally, we have information on the investments in different mutual funds made by a small subgroup of investors known to have been exposed to both the atpRating and the Morningstar Rating, i.e. information is provided on how investors use the two ratings. We find that investors have a clear preference for high-rated funds. en_US
dc.format.extent 49 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2005-006 en_US
dc.title Rating mutual funds en_US
dc.type wp en_US
dc.accessionstatus modt05nov21 miel en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Finansiering en_US
dc.contributor.departmentshort FI en_US
dc.contributor.departmentuk Department of Finance en_US
dc.contributor.departmentukshort FI en_US
dc.idnumber 8790705971 en_US
dc.publisher.city København en_US
dc.publisher.year 2005 en_US
dc.title.subtitle Construction and information content of an investor-cost based rating of Danish mutual funds en_US


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