financial literacy of investors reduces uncertainty on future decisions and increases predictability of investment policies in financial markets. thus, the lack of clear information on financial markets is a determining factor in the arrival of domestic and foreign capitals and their quick exit in case of crisis. the lack of transparency and basic knowledge on decisions and failure to provide r...

It is widely accepted that, when return distributions are non-normal, the use of the Sharpe ratio can lead to misleading conclusions. It is well documented that deviations of hedge fund return distributions from normality are statistically significant. The literature on performance evaluation that takes into account the non-normality of return distributions is a vast one. However, there is anot...

We show that investors derive utility from non-pecuniary characteristics of investments by studying impact funds, defined as venture or growth equity funds with dual objectives of generating financial returns and positive externalities. Impact funds earn internal rates of return that are 4.7% less than traditional VC funds in reduced form regressions. Based on estimates of a willingness to pay ...

We show that a mutual fund’s stock selection skill can be decomposed into additional components that include liquidity-absorbing impatient trading and liquidity provision. We find that past performance predicts future performance better among funds trading in stocks affected more by information events: Past winners earn a risk-adjusted after-fee excess return of 35 basis points per month in the...

This study illustrates the use of data envelopment analysis to benchmark mutual funds on the basis of risk-adjusted performance, load, 12b-1 plan, and expense ratios. Using the DEA methodology, we calculate an efficiency score for 189 funds on a scale of 1 to 100 by maximizing twelve month total return and minimizing beta, standard deviation, load, 12b-1 charges, and expense ratios. This study ...

Using a comprehensive and survivor bias-free dataset of US hedge funds, we document the role that inside investment plays in managerial compensation and fund performance. We find that funds with greater investment by insiders outperform funds with less “skin in the game” on a factor-adjusted basis, exhibit greater return persistence, and feature lower fund flow-performance sensitivities. These ...

A number of research studies conclude that active US equity open-end mutual funds underperform on average and that overall manager skill is diminishing. This contrasts with other studies documenting systematic ways investors can identify managers who subsequently outperform. In this study, involving all active US equity mutual funds over the period February 1980 through February 2009 (resulting...