The sustainability of investment decision making
|Speaker:||Paul Klumpes, EDHEC Business School|
|Date:||Friday 23 March 2012|
We derive and test a simple, new multidimensional measure of mutual fund performance management, using a combination of the hit rate and the win-loss ratio. We apply this measure to an internationally diversified portfolio of 215 pension fund managers. Performance is decomposed by quartile and we further discriminate how the hit rate and the win-loss ratio can help clarify the effect of sentiment on over performances and relative underperformers. We explain performance in terms of a trade-off between the alpha and hit rate and win-loss ratio, conditioned on other factors associated with the judgment process.