1 May 1994Financial Analysts JournalVolume 50, Issue 3
Mutual Fund Trading Activity and Investor Utility
Walton R.L. Taylor
James A. Yoder
Can trading activity by managers of high-risk mutual funds make a positive contribution to investor utility? Stochastic dominance is used to compare the returns of high-turnover funds with those of low-turnover funds. This approach avoids the limitations of a mean/variance or regression approach and minimizes problems of survivorship bias. The results show that high-turnover groups dominate low-turnover groups, or at least are equally attractive to risk-averse investors. Active portfolio management can enhance investor utility, even when the costs of obtaining and exploiting costly information are taken into account.
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Financial Analysts Journal
CFA Institute Member ContentPublisher Information
Association for Investment Management and Research
4 pages doi.org/10.2469/faj.v50.n3.66ISSN/ISBN: 0015-198X
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