Multiple studies have examined the relationship between performance and subsequent fund flows. Prior work takes a fund's dollar flows divided by its assets under management as the dependent variable. However, individual fund flows have to add up to the aggregate flow in every period. If...

This paper proposes a simple back testing procedure that is shown to dramatically improve a panel data model's ability to produce out of sample forecasts. Here the procedure is used to forecast mutual fund alphas. Using monthly data with an OLS model it has been difficult to consistently predict...

Consider an economy in which the underlying security returns follow a linear factor model with constant coeffcients. While portfolios that invest in these securities willin general, have a linear factor structure, it will be one with time-varying coeffcients. However, under certain assumptions...

This paper proposes a simple back testing procedure that is shown to dramatically improve a panel data model's ability to produce out of sample forecasts. Here the procedure is used to forecast mutual fund alphas. Using monthly data with an OLS model it has been difficult to consistently predict...

This article develops a Kalman filter model to track dynamic mutual fund factor loadings. It then uses the estimates to analyze whether managers with market-timing ability can be identified ex ante. The primary findings are as follows: (i) Ordinary least squares (OLS) timing models produce false...