Risk estimation bias and mutual fund performance

Qiang Bu

doi:10.1108/RBF-03-2018-0023

Risk estimation bias and mutual fund performance

Qiang Bu

School of Business Administration (Harrisburg)

Research output: Contribution to journal › Article › peer-review

Abstract

Purpose: The purpose of this paper is to create a quantitative measure that captures the effects of investor sentiment in an objective way. Design/methodology/approach: The author introduced risk estimation bias (REB) to examine the effects of forecasting error of future market volatility on fund alpha. The author also used GARCH to model the volatility of the REB. Findings: The author documented a statistically significant relation between REB and realized market volatility. The author also found that the REB plays a significant role in explaining fund alpha. Originality/value: REB is the first quantitative measure to examine the effects of investor sentiment on risk estimation and fund performance. The GRACH properties of REB provide important information on how investor sentiment fluctuates over time.

Original language	English (US)
Pages (from-to)	426-440
Number of pages	15
Journal	Review of Behavioral Finance
Volume	11
Issue number	4
DOIs	https://doi.org/10.1108/RBF-03-2018-0023
State	Published - Nov 20 2019

All Science Journal Classification (ASJC) codes

Accounting
Finance
Strategy and Management

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10.1108/RBF-03-2018-0023

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title = "Risk estimation bias and mutual fund performance",

abstract = "Purpose: The purpose of this paper is to create a quantitative measure that captures the effects of investor sentiment in an objective way. Design/methodology/approach: The author introduced risk estimation bias (REB) to examine the effects of forecasting error of future market volatility on fund alpha. The author also used GARCH to model the volatility of the REB. Findings: The author documented a statistically significant relation between REB and realized market volatility. The author also found that the REB plays a significant role in explaining fund alpha. Originality/value: REB is the first quantitative measure to examine the effects of investor sentiment on risk estimation and fund performance. The GRACH properties of REB provide important information on how investor sentiment fluctuates over time.",

author = "Qiang Bu",

note = "Publisher Copyright: {\textcopyright} 2019, Emerald Publishing Limited.",

year = "2019",

month = nov,

day = "20",

doi = "10.1108/RBF-03-2018-0023",

language = "English (US)",

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AB - Purpose: The purpose of this paper is to create a quantitative measure that captures the effects of investor sentiment in an objective way. Design/methodology/approach: The author introduced risk estimation bias (REB) to examine the effects of forecasting error of future market volatility on fund alpha. The author also used GARCH to model the volatility of the REB. Findings: The author documented a statistically significant relation between REB and realized market volatility. The author also found that the REB plays a significant role in explaining fund alpha. Originality/value: REB is the first quantitative measure to examine the effects of investor sentiment on risk estimation and fund performance. The GRACH properties of REB provide important information on how investor sentiment fluctuates over time.

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Risk estimation bias and mutual fund performance

Abstract

All Science Journal Classification (ASJC) codes

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