3. An Appraisal of Modeling Dimensions for Performance Appraisal of Global Mutual Funds

A number of studies have been conducted to examine investment performance of mutual funds of the developed capital markets. Grinblatt and Titman (1989, 1994) found that small mutual funds perform better than large ones and that performance is negatively correlated to management fees but not to fund size or expenses. Hendricks, Patel, and Zeckhauser (1993), Goetzmann and Ibbotson (1994), and Brown and Goetzmann (1995) present evidence of persistence in mutual fund performance. Grinblatt and Titman (1992) and Elton, Gruber, and Blake (Journal of Financial Economics 42:397–421, 1996) show that past performance is a good predictor of future performance. Blake, Elton, and Grubber (1993), Detzler (1999), and Philpot, Hearth, Rimbey, and Schulman (1998) find that performance is negatively correlated to fund expense, and that past performance does not predict future performance. However, Philpot, Hearth, and Rimbey (2000) provide evidence of short-term performance persistence in high-yield bond mutual funds. In their studies of money market mutual funds, Domian and Reichenstein (1998) find that the expense ratio is the most important factor in explaining net return differences. Christoffersen (2001) shows that fee waivers matter to performance. Smith and Tito (1969) conducted a study into 38 funds for 1958–1967 and obtained similar results. Treyner (1965) advocated the use of beta coefficient instead of the total risk.