A survival analysis of Australian equity mutual funds
Determining which types of mutual (or managed) investment funds are goodfinancial investments is complicated by potential survivorship biases. This projectadds to a small recent international literature on the patterns and determinants ofmutual fund survivorship. We use statistical techniques for survival data that arerarely applied in finance. Of specific interest is the hazard rate of fund closure,which gives the variation over time in the conditional probability of fund closuregiven fund survival to date.For a sample of 251 retail investment funds in Australiafrom 1980 to 1999 weidentify a hump-shaped hazard function that reaches its maximum after about five orsix years, a pattern similar to the UK findings of Lunde. Timmermann and Blake(1999). We also consider the impact of monthly and annual fund performance (grossand relative to a market benchmark). Returns relative to the benchmark are muchmore important than gross returns, with higher relative returns associated withlower hazard of fund closure. There appears to be an asymmetric response toperformance, with positive shocks having a larger impact on the hazard rate thannegative shocks.
|Year of publication:||
|Authors:||Cameron A ; Hall Anthony|
Australian Graduate School of Management
|Type of publication:||Other|
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