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Arbitrage bounds and U.K. unit trust performance

Fletcher, Jonathan and Ntozi-Obwale, Patricia (2008) Arbitrage bounds and U.K. unit trust performance. Journal of Business Finance and Accounting, 35 (3-4). pp. 580-600. ISSN 0306-686X

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Abstract

We use the arbitrage performance bounds of Ahn, Cao and Chretien (2003) to evaluate U.K. unit trust performance between January 1988 and December 2002. We find that trust performance is sensitive to the admissible stochastic discount factor used for both the average trust and the majority of individual trusts. The investment style, size, load charge, and annual charge of the trust all have an impact on trust performance. We find for some trusts, the Jensen (1968) and Ferson and Schadt (1996) measures do not satisfy arbitrage bounds by the base assets.