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Evaluating Real Estate Mutual Fund Performance Using The Morningstar Upside/Downside Capture Ratio

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  • James L. Kuhle
  • Eric C. Lin

Abstract

The purpose of this research is to explore the viability of utilizing the Morningstar upside/downside capture ratio (UDCR) as viable measure of mutual fund risk and its relation to return. This research examines and compares result of the Sharpe ratio to the Morningstar upside/downside capture ratio (UDCR) in an effort to determine if the UDCR might better explain the ex-post performance of the mutual funds examined. Three sectors of 268 mutual funds are examined; these include domestic equity real estate, domestic equity value funds, and global equity real estate as defined and reported on the Morningstar database. This research considers the traditional measures of risk which include the standard deviation of returns along with the Sharpe ratio. The empirical results suggest that UDCR may provide a more accurate fit in explaining real estate mutual fund returns than the Sharpe Ratio

Suggested Citation

  • James L. Kuhle & Eric C. Lin, 2018. "Evaluating Real Estate Mutual Fund Performance Using The Morningstar Upside/Downside Capture Ratio," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 12(1), pages 15-22.
    • Handle: RePEc:ibf:gjbres:v:12:y:2018:i:1:p:15-22
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    References listed on IDEAS

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    1. Meyer, Jack & Rasche, Robert H, 1992. "Sufficient Conditions for Expected Utility to Imply Mean-Standard Deviation Rankings: Empirical Evidence Concerning the Location and Scale Condition," Economic Journal, Royal Economic Society, vol. 102(410), pages 91-106, January.
    2. Yen-Hsien Lee, 2014. "An international analysis of REITs and stock portfolio management based on dynamic conditional correlation models," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 28(2), pages 165-180, May.
    3. Schuhmacher, Frank & Eling, Martin, 2012. "A decision-theoretic foundation for reward-to-risk performance measures," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2077-2082.
    4. Eling, Martin & Schuhmacher, Frank, 2007. "Does the choice of performance measure influence the evaluation of hedge funds?," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2632-2647, September.
    5. James L. Kuhle, 1987. "Portfolio Diversification and Return Benefits--Common Stock vs. Real Estate Investment Trusts (REITs)," Journal of Real Estate Research, American Real Estate Society, vol. 2(2), pages 1-9.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Real Estate; Mutual Funds; Morningstar; Sharpe Ratio;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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