Finance Papers

Document Type

Journal Article

Date of this Version

2002

Publication Source

Review of Financial Studies

Volume

15

Issue

5

Start Page

1439

Last Page

1463

DOI

10.1093/rfs/15.5.1439

Abstract

This article provides a comprehensive study of survivorship issues using the mutual fund data of Carhart (1997). We demonstrate theoretically that when survival depends on multiperiod performance, the survivorship bias in average performance typically increases with the sample length. This is empirically relevant because evidence suggests a multiyear survival rule for U.S. mutual funds. In the data we find the annual bias increases from 0.07% for 1-year samples to 1% for samples longer than 15 years. We find that survivor conditioning weakens evidence of performance persistence. Finally, we explain how survivor conditioning affects the relation between performance and fund characteristics.

Copyright/Permission Statement

This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Financial Studies following peer review. The version of record is available online at: http://dx.doi.org/10.1093/rfs/15.5.1439.

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Date Posted: 27 November 2017

This document has been peer reviewed.