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Essays on the emiprical properties of stock and mutual fund returns

Author(s)
Taylor, Jonathan David, 1969-
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Massachusetts Institute of Technology. Operations Research Center.
Advisor
Andrew W. Lo.
Terms of use
M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. http://dspace.mit.edu/handle/1721.1/7582
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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).
 
Date issued
2000
URI
http://hdl.handle.net/1721.1/9043
Department
Massachusetts Institute of Technology. Operations Research Center; Sloan School of Management
Publisher
Massachusetts Institute of Technology
Keywords
Operations Research Center.

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