Benchmark-adjusted performance of US equity mutual funds and the issue of prospectus benchmarks

This study examines the impact of mismatch between prospectus benchmark and fund objectives on benchmark-adjusted fund performance and ranking in a sample of 1281 US equity mutual funds. All funds in our sample report S&P500 index as a prospectus benchmark, yet 2/3 of those are placed in the Morningstar category with risk and objectives different to those of the S&P500 index. We identify more appropriate ‘category benchmarks’ for those mismatched funds and obtain their benchmark-adjusted alphas using recent Angelidis et al. (J Bank Finance 37(5):1759–1776, 2013) methodology. We find that S&P500-adjusted alphas are higher than ‘category benchmark’-adjusted alphas in 61.2% of the cases. In terms of fund quartile rankings, 30% of winner funds lose that status when the prospectus benchmark is substituted with the one better matching their objectives. In the remaining performance quartiles, there is no clear advantage of using S&P 500 as a benchmark. Hence, the prospectus benchmark can mislead investors about fund’s relative performance and ranking, so any reference to performance in a fund’s prospectus should be treated with caution

Use of Active Peer Benchmarks in assessing UK mutual fund performance and performance persistence

The majority of UK style-specific mutual funds either report a broad market index as their prospectus benchmark or give no benchmark at all — a practice that may be a) strategic, or b) cultural and attributable to the lack of UK style-specific indices (e.g., mid-cap-growth, small-cap-value). The choice of a broad market index as a benchmark can bias the inferences of a fund’s performance and performance persistence. This study is the first to provide an alternative to style-specific indices in the UK, and suggests the use style-specific peer group benchmarks, following Hunter et al. (2014). Our sample comprises of 817 active UK long-only equity mutual funds allocated to nine Morningstar style categories (peer groups) during the period 1992–2016. We show that the funds with the most significant positive peer-group-adjusted alphas continued to perform well one year ahead, in terms of both parametric and non-parametric measures of persistence in performance. Moreover, persistence in performance is driven by both winner and loser funds. The results within each peer group are by and large consistent with these findings

UK equity mutual fund alphas make a comeback

In this study, we re-visit the performance of 887 active UK equity mutual funds using a new approach proposed by Angelidis, Giamouridis, and Tessaromatis. The authors argue that mutual funds stock selection is driven by the benchmark index, so if the benchmark generates alpha, there will be a bias in interpretation of manager's stock-picking ability. In their model, the alpha of a fund is adjusted by the benchmark's alpha. By applying this method, we eliminate bias inflicted by the persistently negative alphas of FTSE 100 Index in the period 1992-2013. We find that adjusted Fama-French and Carhat alphas of UK equity mutual funds are higher than those implied by the standard three- and four-factor models and are overall positive, contrary to most of the existing literature on UK fund performance. This result is consistent across funds' investment styles and robust to the use of FTSE Small Cap as benchmark for a sub-sample of small cap funds

A comprehensive classification of galaxies in the SDSS: How to tell true from fake AGN?

We use the W_Ha versus [NII]/Ha (WHAN) diagram to provide a comprehensive emission-line classification of SDSS galaxies. This classification is able to cope with the large population of weak line galaxies that do not appear in traditional diagrams due to a lack of some of the diagnostic lines. A further advantage of the WHAN diagram is to allow the differentiation between two very distinct classes that overlap in the LINER region of traditional diagnostic diagrams. These are galaxies hosting a weakly active nucleus (wAGN) and "retired galaxies" (RGs), i.e. galaxies that have stopped forming stars and are ionized by their hot evolved low-mass stars. A useful criterion to distinguish true from fake AGN (i.e. the RGs) is the ratio (\xi) of the extinction-corrected L_Ha with respect to the Ha luminosity expected from photoionization by stellar populations older than 100 Myr. This ratio follows a markedly bimodal distribution, with a \xi >> 1 population composed by systems undergoing star-formation and/or nuclear activity, and a peak at \xi ~ 1 corresponding to the prediction of the RG model. We base our classification scheme on the equivalent width of Ha, an excellent observational proxy for \xi. Based on the bimodal distribution of W_Ha, we set the division between wAGN and RGs at W_Ha = 3 A. Five classes of galaxies are identified within the WHAN diagram: (a) Pure star forming galaxies: log [NII]/Ha 3 A. (b) Strong AGN (i.e., Seyferts): log [NII]/Ha > -0.4 and W_Ha > 6 A. (c) Weak AGN: log [NII]/Ha > -0.4 and W_Ha between 3 and 6 A. (d) RGs: W_Ha < 3 A. (e) Passive galaxies (actually, line-less galaxies): W_Ha and W_[NII] < 0.5 A. A comparative analysis of star formation histories and of other properties in these different classes of galaxies corroborates our proposed differentiation between RGs and weak AGN in the LINER-like family. (Abridged)Comment: Accepted for publication in MNRA

Review of new trends in the literature on factor models and mutual fund performance

In this paper we provide critical review of recent developments in the mutual fund performance evaluation literature. The new literature centres around two main themes: enhancing explanatory power of the standard Fama-French-Carhart factor models by augmenting them with different factors and altering standard models to account for presence of non-zero alphas in passive indices used as fund benchmarks. The latter includes the literature providing solutions for scenarios in which those benchmarks do not match fund objectives. We find that in the plethora of suggested ‘missing’ factors, not one can be universally used to explain all anomalies or price all stocks. We also find that new models that adjust a fund's standard Carhart alpha for alpha of its benchmark or for commonalities in its peer–group, provide additional information on fund performance to that given by the standard models. Specifically, these models give account of fund's relative performance - to the benchmark or the peer-group, which is of use to investors

Semi-empirical analysis of Sloan Digital Sky Survey galaxies III. How to distinguish AGN hosts

We consider the techniques to distinguish normal star forming (NSF) galaxies and active galactic nuclei (AGN) hosts using optical spectra. The observational data base is a set of 20000 galaxies extracted from the Sloan Digital Sky Survey, for which we have determined the emission line intensities after subtracting the stellar continuum obtained from spectral synthesis. Our analysis is based on photoionization models computed using the stellar ionizing radiation predicted by Starburst 99 and, for the AGNs, a broken power-law spectrum. We explain why, among the four classical emission line diagnostic diagrams, the [OIII]/Hb vs [NII]/Ha one works best. We show however, that none of these diagrams is efficient in detecting AGNs in metal poor galaxies, should such cases exist. We propose a new divisory line between ``pure'' NSF galaxies and AGN hosts. We also show that a classification into NSF and AGN galaxies using only [NII]/Ha is feasible and useful. Finally, we propose a new classification diagram, the DEW diagram, plotting D_n(4000) vs max(EW[OII],EW[NeIII]). This diagram can be used with optical spectra for galaxies with redshifts up to z = 1.3, meaning an important progress over classifications proposed up to now. Since the DEW diagram requires only a small range in wavelength, it can also be used at even larger redshifts in suitable atmospheric windows. It also has the advantage of not requiring stellar synthesis analysis to subtract the stars and of allowing one to see ALL the galaxies in the same diagram, including passive galaxies.Comment: 14 pages, 9 figures, accepted for publication in MNRAS (replaced on august 3, 2006, eqs 6 and 7 corrected

The many faces of LINER-like galaxies: a WISE view

We use the SDSS and WISE surveys to investigate the real nature of galaxies defined as LINERs in the BPT diagram. After establishing a mid-infrared colour W2-W3 = 2.5 as the optimal separator between galaxies with and without star formation, we investigate the loci of different galaxy classes in the W_{Ha} versus W2-W3 space. We find that: (1) A large fraction of LINER-like galaxies are emission-line retired galaxies, i.e galaxies which have stopped forming stars and are powered by hot low-mass evolved stars (HOLMES). Their W2-W3 colours show no sign of star formation and their Ha equivalent widths, W_{Ha}, are consistent with ionization by their old stellar populations. (2) Another important fraction have W2-W3 indicative of star formation. This includes objects located in the supposedly `pure AGN' zone of the BPT diagram. (3) A smaller fraction of LINER-like galaxies have no trace of star formation from W2-W3 and a high W_{Ha}, pointing to the presence of an AGN. (4) Finally, a few LINERs tagged as retired by their W_{Ha} but with W2-W3 values indicative of star formation are late-type galaxies whose SDSS spectra cover only the old `retired' bulge. This reinforces the view that LINER-like galaxies are a mixed bag of objects involving different physical phenomena and observational effects thrusted into the same locus of the BPT diagram.Comment: Accepted for publication in MNRAS; 9 pages, 6 figure

A media independent information service integration architecture for media independent handover

A present challenge in wireless networks is to provide mobility, regardless of the access technology in use, with guaranteed continuity of the service and transparency for the users. One approach to these seamless handovers is to prepare network access in advance, such as pre-authentication, before the mobile device actually physically connects to the desired network. This process requires that the mobile device can discover the parameters of the networks in their geographical area prior to connect to the candidate network. To address these issues, in this paper we propose an integration architecture for a Media Independent Information Service, where several networks elements collaborate in the discovery of information network, and mobile devices collect the desired neighboring network information with a query-response mechanism in two steps. A prototype has been implemented with of the shelf hardware, and several tests have been conducted. Results are better than the ones available in the literature, and network selection is performed in a short period of time.info:eu-repo/semantics/acceptedVersio