Working Paper: NBER ID: w8790
Authors: Wayne Ferson; Kenneth Khang
Abstract: This paper combines the use of portfolio holdings data and conditioning information to create a new performance measure. Our conditional weight-based measure has several advantages. Using conditioning information avoids biases in weight-based measures as discussed by Grinblatt and Titman (1993). When conditioning information is used, returns-based measures face a bias if managers can trade between observation dates. The new measures avoid this interim trading bias. We use the new measures to provide fresh insights about performance in a sample of U.S. equity pension fund managers.
Keywords: No keywords provided
JEL Codes: G12; G14; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conditional weight measure (CWM) (C10) | accurate assessment of performance (C52) |
| conditional weight measure (CWM) (C10) | control for interim trading bias (G41) |
| interim trading bias (F14) | biased performance measurement (C52) |
| portfolio weights (G11) | more accurate performance measure (C52) |
| private information (D82) | positive covariance with portfolio weight changes (C10) |
| conditional weight measure (CWM) (C10) | reveals source of performance (public vs. private information) (D82) |
| conditional weight measure (CWM) (C10) | provides more precision in performance evaluation (C52) |
| returns-based measures (G12) | biased estimates of pension fund performance (J32) |