Portfolio performance evaluation : a study of UK unit trusts
Beginning with Jensen(1968), the evaluation of the investment performance of managed funds has been a major topic in Finance. This has not been without controversy, especially how the risk of the fund is to be measured. Evaluating portfolio performance has been closely associated with tests of market efficiency. Practically all of the theoretical and empirical studies have been conducted in the USA. The evaluation of fund performance in the UK has been limited. This study seeks to examine a number of issues in performance measurement using a sample of UK unit trusts. The study is organised as follows. Chapter 1 presents an overview of the performance measurement literature. The chapter describes Grinblatt and Titman's(l989) framework which provides the theoretical underpinnings of the study. Chapter 2 reports the tests of the ex ante mean-variance efficiency of a number of benchmark portfolios which are used to evaluate performance. Chapter 3 examines the performance of a sample of UK unit trusts using the Jensen(1968) measure against a number of benchmark portfolios. The chapter also considers the empirical significance of the potential timing biases in the Jensen measure. Chapter 4 presents evidence of the selectivity and timing performance of the trusts. Chapter 5 investigates the factors which may affect trust performance. These include the investment objective, size, expense ratios of the trusts. The final chapter presents the conclusions of the study.