← Search

Journal of Banking & Finance Vol. 50 2015

The prediction of fund failure through performance diagnostics

Philippe Cogneau1,2,3; Georges Hübner1

1 University of Liège · 2 Haute École Francisco Ferrer · 3 Ecole des Hautes Etudes Commerciales du Nord

open access

Abstract

Using an international database featuring 1624 mutual funds over 15years, this paper analyses the joint abilities of performance measures to predict subsequent fund failure. We examine the probability of disappearance over a time window, and expected fund survival time, and study the circumstances of a fund’s disappearance, its currency and domicile. By combining relevant measures, fund failure appears to a significant extent predictable, more than with single classical measures. Survivorship predictability has significant economic value. Such evidence suggests that past performance does not only influence investors’ perception of fund quality, but also reflects managers’ ability to sustain performance.

DOI
10.1016/j.jbankfin.2014.10.004
Volume
50
Pages
224-241
Language
en
Sources
openalex crossref bibtex:phds-export.bib

Cite