On performance effects of mutual fund derivative use and other sources of non-linearity
- This dissertation aims to close two research gaps. First, it aims at improving the understanding of relations between both equity and bond mutual funds and complex investment practices. The second goal is to contribute to the literature on biases in performance and risk measures for mutual funds. Chapter II thus answers the question if option use by US domestic equity mutual funds is beneficial or harmful for investors and whether SEC's worries about the use of these instruments are justified. Chapter III examines relations between the use of a broader range of complex investment practices by bond mutual funds. The focus of Chapter IV lies on the second main goal of this dissertation and reveals a systematic bias in bond fund performance measurement that arises from the non-linear relationship between changes in the term structure and bond returns, which has been neglected until now. Chapter V reviews the performance of option strategy benchmark indices provided by the Chicago Board ofThis dissertation aims to close two research gaps. First, it aims at improving the understanding of relations between both equity and bond mutual funds and complex investment practices. The second goal is to contribute to the literature on biases in performance and risk measures for mutual funds. Chapter II thus answers the question if option use by US domestic equity mutual funds is beneficial or harmful for investors and whether SEC's worries about the use of these instruments are justified. Chapter III examines relations between the use of a broader range of complex investment practices by bond mutual funds. The focus of Chapter IV lies on the second main goal of this dissertation and reveals a systematic bias in bond fund performance measurement that arises from the non-linear relationship between changes in the term structure and bond returns, which has been neglected until now. Chapter V reviews the performance of option strategy benchmark indices provided by the Chicago Board of Options Exchange (CBOE) and uncovers the complexity of different approaches to measure performance and risk of portfolios containing options. The last chapter VI sums up the results of this dissertation and gives an understanding of research ideas that might be relevant in the future based on the insights provided in this dissertation.…