An intertemporal CAPM approach to evaluate mutual fund performance

Jow Ran Chang, Mao Wei Hung, Cheng Few Lee

Research output: Contribution to journalArticlepeer-review


Merton (1973) and Campbell (1993) have demonstrated that if an investor anticipates information shifts, he will adjust his portfolio choice today in an attempt to hedge these shifts. Exploiting these insights, we construct a new performance measure to evaluate fund managers' hedging ability. This new measure is different from two widely adopted performance evaluation measures: securities selectivity and market timing. Moreover, an econometric methodology is developed to simultaneously estimate the magnitudes of these three portfolio performance evaluation measures. The results show that mutual fund managers are on average with positive security selection and negative market timing ability. Furthermore, the mutual funds with investment style classified as "Asset Allocation" generally have positive hedging timing ability.

Original languageAmerican English
Pages (from-to)415-433
Number of pages19
JournalReview of Quantitative Finance and Accounting
Issue number4
StatePublished - Jun 2003

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)
  • Finance


  • Intertemporal CAPM
  • Mutual fund
  • Performance evaluation


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