Survivorship Bias and Mutual Fund Performance
52 Pages Posted: 11 Nov 2008
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Survivorship Bias and Mutual Fund Performance
Survivorship Bias and Mutual Fund Performance
Date Written: March 1995
Abstract
Mutual fund attrition can create problems for a researcher, because funds that disappear tend to do so due to poor performance. In this paper we estimate the size of the bias by tracking all funds that existed at the end of 1976. When a fund merges we calculate the return, taking into account the merger terms. This allows a precise estimate of survivorship bias. In addition, we examine characteristics of both mutual funds that merge and their partner funds. Estimates of survivorship bias over different horizons and using different models to evaluate performance are provided.
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