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Generalized Functional Form for Mutual Fund Returns

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  • Fabozzi, Frank J.
  • Francis, Jack C.
  • Lee, Cheng F.

Abstract

Based on the theory of the pricing of capital assets developed by Sharpe [12], Lintner [9] and Mossin [11], Professor Jensen formulated a return-generating model to measure portfolio performance [5]. In a subsequent paper, Professor Jensen [6] investigated the impact of the investment horizon on the functional form of the model. Lee [8] has proposed a generalized specification of the model to resolve this problem. Alternative estimation methods for testing the linearity of the model in terms of time-series data have also been suggested by Lee. Moreover, the stability of the beta coefficient over time and the impact of the market's condition on both the alpha (or, Jensen's measure of performance [5]) and beta of the model have come under scrutiny in financial research.

Suggested Citation

  • Fabozzi, Frank J. & Francis, Jack C. & Lee, Cheng F., 1980. "Generalized Functional Form for Mutual Fund Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(5), pages 1107-1120, December.
    • Handle: RePEc:cup:jfinqa:v:15:y:1980:i:05:p:1107-1120_01
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    Cited by:

    1. Sudarsanam, P. S. & Taffler, R. J., 1995. "Financial ratio proportionality and inter-temporal stability: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 19(1), pages 45-60, April.
    2. Manakyan, Herman & Liano, Kartono, 1997. "Performance of mutual funds before and after closing to new investors," Financial Services Review, Elsevier, vol. 6(4), pages 257-269.
    3. Chintha Sam Sundar & S.Aruna & Kaliyaperumal Karthikeyan, 2012. "Preference Portfolio of Small Investors With Reference To Mutual Funds," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 2(1), pages 1-41.
    4. Chaudhury, M. M. & Lee, C. F., 1997. "Functional form of stock return model: Some international evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(1), pages 151-183.

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