Evaluating The Short-Term Excess-Return: A New Methodology

Authors : Sharon Garyn Tal

Pages : 101-127

View : 14 | Download : 7

Publication Date : 2013-12-01

Article Type : Other

Abstract :In this paper, a new methodology for evaluating short-term excess return is suggested. The intuition behind this methodology is derived from the forward rate calculation and it does not require that the betas remain constant over time. The new methodology is compared with other short-term estimators and substantial score and ranking differences are found. In addition, the short-term estimators are analyzed based onaspects of expected value and variance and the conclusion is that the new methodology is the better one. Simulation tests support this result. Finally, the new methodology also yields performance scores and rankings that are the most consistent with their long-term counterparts.
Keywords : Mutual funds, performance measurement, short-term alpha.