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KIC000143 - _Ws Performance of Mutual Funds(cont‘d I...

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Unformatted text preview: -_Ws Performance of Mutual Funds (cont‘d) I Performance of bond mutual funds (cont‘d) 0 Change in the risk premium I Bond prices decline in response to an increase in the risk premium I Poor economic ccnditicm tend to increase the risk premium D Change in management abilities I The perfnnnama of specific bend classifications varies due to differences in managers' abilities I An eificientfund has low expenses and high returns IW _ Performance of Mutual Funds (ccnt'd) I Performance of closed—end bond funds i:I Driven by the same fedors as open-end bond funds D chased-and bond funds are also affected by a change in their premium or discount I Performance from diversifying among mutual funds in The performance of any given mutuai fund may be primarily driven by a single economic factor I I.g.. growth fundure runny dependant on the stock market“: porter-rune- El Diversification across different mutual funds reduces susceptibility to any particulartype of risk Performance of ‘Mutual Funds (cont’d) I Research on stock mutual fund performance D The performance should be compared to a market index and risk should be considered El Most studies find that mutual funds do not cutperfcnn the market, especially when accounting for the type of securities that the fund invests in I Even when returns are adjusted for risk. mutual funds fail to outperform the market 14 .1'- M ...
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