Essays on the emiprical properties of stock and mutual fund returns
Name
47934705-MIT.pdf
Description
Full printable version
Size
7.81 MB
Format
Adobe PDF
Checksum (MD5)
26abef7ab734e3920ed47b1c806cdf32
Author(s)
Taylor, Jonathan David, 1969-
Advisor(s)
Andrew W. Lo.
Date Issued
2000
Publisher
Massachusetts Institute of Technology
Abstract
Survivorship bias influences statistical inference in Finance. Through a series of Monte Carlo simulations in the style of Brown, Goetzmann, Ibbotson, and Ross {1992), we study the sampling distribution of the mean return, standard deviation, beta, Fama & MacBeth {1973) t-statistic, and Jegadeesh & Titman (1993) momentum strategy return in progressively truncated datasets. Survivor-biased datasets have higher mean returns, lower return standard deviations and lower betas than the full sample. Beta has no explanatory power even when the CAPM is true, a finding virtually unaffected by survivorship bias. Returns to a momentum strategy are positive even when stock idiosyncratic returns are serially and cross-sectionally uncorrelated, but survivorship bias overestimates the returns and underestimates the beta of the strategy.
Description
Thesis (Ph.D.)--Massachusetts Institute of Technology, Sloan School of Management, Operations Research Center, 2000.
Includes bibliographical references (leaves 95-102).
Subjects
Operations Research Center.
MIT Department
Massachusetts Institute of Technology. Operations Research Center
Sloan School of Management
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