A stochastic dominance analysis of the turnover related performance of mutual funds |
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Authors: | Walton R L Taylor James A Yoder |
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Institution: | (1) Division of Business, University of Southern Mississippi, Gulf Park, 39560 Long Beach, MS;(2) College of Business, Department of Finance, University of South Alabama, 36688 Mobile, AL |
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Abstract: | Mutual fund performance relative to portfolio turnover is examined for funds in different investment categories using non-parametric, stochastic dominance criteria. We find that, in general, high-turnover funds are at least equally preferable to those with low turnover. This suggests that the costs of obtaining and exploiting information are, on average, compensated for by the subsequent return distribution. The exception is maximum capital gains funds. Here, high-turnover funds clearly dominate those with low turnover and the information gathering function is profitable.We gratefully acknowledge the contribution of an anonymous referee and the comments of Art Gudikunst of Bryant College. |
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Keywords: | mutual fund portfolio turnover performance stochastic dominance |
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