Do Mutual Funds Perform When It Matters Most to Investors?
| Dec 28th, 2006 | Filed under: Academic Research, CAPM / Alpha Theory | By: Alpha Male |
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By: Robert Kosowski, INSEAD
Published: August 30, 2006
Mutual fund detractors commonly cite their market under performance after fees. But not content to blindly accept this argument, Professor Robert Kosowski of INSEAD asks how mutual funds perform in periods of economic expansion vs. economic recession.
After completing what he calls “one of the most comprehensive examinations of the performance of US domestic equity mutual funds in recessions and expansions”, the professor concludes that US mutual funds actually perform better during recessions than they do during economic expansions. In other words, mutual funds produce more alpha during recessions. Furthermore, Kosowski contends that investors derive higher utility from a marginal increase in wealth during a recession – making mutual funds even better during bad times.
States Kosowski:
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