The Hazards of Mutual Fund Underperformance: A Cox Regression AnalysisAsger Lunde (), Allan Timmermann and David Blake University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego Abstract: This paper investigates the process determining mutual funds' conditional probability of closure, i.e. their hazard function. Using a nonparametric approach to estimate the effects of a fund's age on its hazard rate, we find a distinctly nonlinear, inverse U-shaped pattern in the relationship. Hence young and very old funds are least likely to be closed down. A fund's relative performance and (less significantly) the level of return in the sector in which the fund operates are also identified as important factors in the closure decision. Results from semiparametric Cox regressions are compared with those from the discrete choice probit model used by Brown and Goetzmann (1995). Finally, we provide a complete summary of the fund attrition process by estimating the survivor function, indicating the proportion of funds that survive up to a given age, and we identify the effect of fund attrition on standard measures of persistence of fund performance. Keywords: mutual funds; duration analysis; Cox regression; discrete choice model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucsdec:qt1pd3z1hm Access Statistics for this paper More papers in University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego Contact information at EDIRC. |
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