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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Christopher Jones

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December 2002Mutual Fund Performance with Learning Across Funds
with Jay Shanken: w9392
This paper is based on the premise that knowledge about the alphas of one set of funds will influence an investor's beliefs about other funds. This will be true insofar as an investor's expectation about the performance of a fund is partly a belief about the abilities of mutual fund managers as a group and, more generally, a belief about the degree to which financial markets are efficient. We develop a simple framework for incorporating this prior dependence' and find that it can have a substantial impact on the cross-section of posterior beliefs about fund performance as well as asset allocation. Under independence, the maximum posterior mean alpha increases without bound as the number of funds increases and 'extremely large' estimates are randomly observed. This is true even when fund m...

Published: Jones, Christopher S. and Jay Shanken. "Mutual Fund Performance With Learning Across Funds," Journal of Financial Economics, 2005, v78(3,Dec), 507-552. citation courtesy of

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers onlyInformation about this author at RePEc

 
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