Mutual fund objective misclassification

Kim, Moon J.; Shukla, Ravi; Tomas, Michael J.

doi:10.1016/s0148-6195(00)00022-9

Cited by 81 publications

(47 citation statements)

References 12 publications

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“…The view of Kim, Shukla and Tomas (2000) supports the results of other researchers, namely that fund misclassification does indeed occur. The researchers concluded that in the sample data of the study, 54% of the funds were indeed misclassified.…”

Section: Research Subsequent To Sharpesupporting

confidence: 87%

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Return-based style analysis of domestic targeted absolute and real return unit trust funds in South Africa

Louw¹,

Beer²

2012

COC

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By means of return-based style analysis (RBSA), heterogeneous style sub-categories were identified within the targeted absolute and real return (TARR) category of the South African unit trust market to create a framework for sub-categorisation. The study dealt with TARR funds and their place within the investment universe. The literature review emphasised the importance of asset allocation, which supports the use of RBSA to identify asset allocation and further provided a motivation for the semi-strong form of RBSA applied to the sample data. The findings suggest that in general, return-based style analysis applied to each fund identifies the asset allocation for the fund and is valid and that the collective results of return-based style analysis applied to the funds can be used to create a framework for sub-categorisation

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Section: Research Subsequent To Sharpesupporting

confidence: 87%

“…As in the study of Kim et al (2000) and DiBartolomeo and Witkowski (1997); it is initially assumed that funds are correctly classified (do note that these particular studies subsequently focus on determining whether in actual fact misclassification exists). Table 4.4.…”

Section: Processmentioning

confidence: 99%

Return-based style analysis of domestic targeted absolute and real return unit trust funds in South Africa

Louw¹,

Beer²

2012

COC

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“…Investors make decisions on the basis of the funds' objectives, implicitly assuming that the activities of the funds are consistent with the stated objectives. However, if the stated objectives are not objectives that the funds pursue, conclusions drawn by the investors may be misleading (Kim, Shukla, & Tomas, 2000). Sharpe (1966) reported that mutual funds select a risk class and then invite investors with similar risk preferences to invest.…”

Section: Introductionmentioning

confidence: 99%

“…Di Bartolomeo andWitkowski (1997), Detzel (2006) and Kim, Shukla and Tomas (2000) have shown that the stated objectives or indeed the groupings of unit trusts do not always reflect the true characteristics of the funds. Robertson, Firer and Bradfield (2000) concluded that a significant number of equity unit trusts in South African were misclassified.…”

Section: Introductionmentioning

confidence: 99%

Are the ASISA Standards with Respect to Unit Trust Classification Representative of Homogeneous Risk Classes?

Kainja¹

2016

JFRM

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We examine the information content of South African (SA) equity unit trusts to investigate whether risk is heterogeneous between investment objective groups and homogeneous within groups because those characteristics are vital to proper investment decision making. We find risk differences within SA equity groups especially in the Equity-General and Equity-Growth. However, in the other categories, the systematic risk differences depended on the choice of benchmark. Those risk differences may have significant implications for investors. Examination of between-group risk revealed that not all the equity categories were heterogeneous. We also find that the choice of benchmark is critical when measuring and comparing performance characteristics of funds.

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“…They find that 43% of the mutual funds do not belong to their stated categories and that in many instances self-declared categories of mutual funds are indistinguishable from one another when their classification is based on financial characteristics. Also, Kim et al (2000) classify American mutual funds by employing a discriminant analysis and find that the stated objectives of more than half the mutual funds differ from attributes-based objectives, and over one third of the funds are severely misclassified.…”

Section: Introductionmentioning

confidence: 99%

Self-organizing maps could improve the classification of Spanish mutual funds

Moreno

Marco

Olmeda

2006

European Journal of Operational Research

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In this paper, we apply nonlinear techniques (Self Organizing Maps, k nearest neighbors and the k means algorithm) to evaluate the official Spanish mutual funds classification. The methodology that we propose allows us to identify which mutual funds are misclassified in the sense that they have historical performances which do not conform to the invest ment objectives established in their official category. According to this, we conclude that, on average, over 40% of mutual funds could be misclassified. Then, we propose an alternative classification, based on a double step methodology, and we find that it achieves a significantly lower rate of misclassifications. The portfolios obtained from this alternative classi fication also attain better performances in terms of return/risk and include a smaller number of assets.

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Mutual fund objective misclassification

Cited by 81 publications

References 12 publications

Return-based style analysis of domestic targeted absolute and real return unit trust funds in South Africa

Return-based style analysis of domestic targeted absolute and real return unit trust funds in South Africa

Are the ASISA Standards with Respect to Unit Trust Classification Representative of Homogeneous Risk Classes?

Self-organizing maps could improve the classification of Spanish mutual funds

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