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dc.contributor.author Chen, Yunze
dc.date.accessioned 2012-04-16T15:36:58Z
dc.date.available 2012-04-16T15:36:58Z
dc.date.issued 2012-04-16
dc.identifier.uri http://hdl.handle.net/10161/5138
dc.description Honor Thesis en_US
dc.description.abstract John C. Bogle, the founder of the Vanguard Group, has long insisted on the superiority of index funds over actively managed mutual funds and the foolishness of attempts to time the market. He published two articles in the Journal of Portfolio Management showing that in eight out of nine style categories, managed mutual funds had lower risk-adjusted returns than the corresponding indexes did. While this demonstrates the failure of stock picking by mutual funds to serve investors well, it says nothing about their ability to time the market by changing styles. Managers of asset allocation funds often use a flexible combination of stocks, bonds, and cash; some, but not all, shift assets frequently based on analysis of business-cycle trends. To test his view of market timing, we evaluated the returns of 82 major asset allocation funds by comparing them with the returns of corresponding baskets of Vanguard’s index funds over a 13-year time span. We find that on average the index funds have higher risk-adjusted returns. We conclude that “simplicity is the ultimate sophistication” applies to mutual fund investments. en_US
dc.language.iso en_US en_US
dc.title Are asset allocation funds good at market timing? en_US
dc.department Economics en_US

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