Estimating the performance attributes of Australian multi-sector managed funds within a dynamic Kalman filter framework

Kathryn A. Holmes, Robert Faff

Research output: Contribution to journalArticleResearchpeer-review

14 Citations (Scopus)

Abstract

This paper examines the impact of Kalman filtering as a technique for modeling the risk levels of managed funds. Using a sample of Australian Multi-sector trusts we examine selectivity and market timing performance using conventional performance models alongside Kalman filter models that allow beta to vary via a random walk. Further, we consider the stability and asymmetry of these performance measures together with a measure of volatility timing arising from a cubic model of fund performance. We find that the positive selectivity (negative market timing) that stems from the conventional models is not present with the Kalman filter model. The Kalman filter model tends to show neutral performance for both. However, both models confirm a strong tendency toward negative volatility timing.

Original languageEnglish
Pages (from-to)998-1011
Number of pages14
JournalInternational Review of Financial Analysis
Volume17
Issue number5
DOIs
Publication statusPublished - Dec 2008
Externally publishedYes

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