Abstract
A comparison of Holding-based and Return-based Measures of Mutual Fund Performances of Indian Mutual Funds
by
Kaushik Bhttacharya
Grinblatt & Titman (1993) proposed a measure, the Performance Change Measure (PCM) which is till date the most popular holding based measure. Empirically it comes out with some unique insights about the fund management style and some testable hypotheses with respect to the efficiency/skill of the fund managers to pick stocks& timing the market. However not much has been done to compare and contrast these holding based measures with conventional traditional return and benchmark based measure like Sharpe Ratio or Treynor's ratio or Jensen's-alpha(collectively called traditional return based measures). Their interrelationships are not yet well studied. The specific issue we investigate is does it always imply that a high (low) PCM rank of a scheme is associated with high (low) traditional return based measure rank? If yes/no, what is the cause(es) behind ? We calculate the rolling PCM and traditional performance measures for a sample of 36 Indian mutual funds constituting more than 1600 equity scheme over a period of 5 years. We first calculate rank correlation between the schemes ranked as per PCM and traditional measures and next we use bootstrapping to calculate the p-values of PCM and traditional measures and after comparing find that holding based measure signals different information as compared to traditional return based measures and not necessarily a high (low) PCM rank of a scheme is associated with high (low) traditional return based measure .
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