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The Performance of Bond Mutual Funds

Christopher R. Blake, Edwin J. Elton and Martin J. Gruber
The Journal of Business
Vol. 66, No. 3 (Jul., 1993), pp. 371-403
Stable URL: http://www.jstor.org/stable/2353206
Page Count: 33
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Performance of Bond Mutual Funds
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Abstract

Using linear and nonlinear models, we examine two samples of bond funds: one sample designed to eliminate survivorship bias, and a second much larger sample. Overall and for subcategories of bond funds, we find that bond funds underperform relevant indexes post-expenses. Our results are robust across a wide choice of models. We find that, on average, a percentage-point increase in expenses leads to a percentage-point decrease in performance. The nonlinear model weights closely match actual composition weights. We find no evidence of predictability using past performance to predict future performance for our unbiased sample.

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