Equity Mutual Funds: A Risk-adjusted Performance Analysis of Loads vs. No-loads
Open Access
Author:
Weber, Daniel Eric
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
Timothy T Simin, Thesis Supervisor James Alan Miles, Thesis Honors Advisor
Keywords:
mutual fund load no-load Sharpe Ratio Carhart Four-Factor Model
Abstract:
This thesis applies Sharpe Ratios (1966) and alphas from the Carhart four-factor model (1997) to determine whether no-load mutual funds outperformed load mutual funds over a ten year period, December 2002 through December 2012, using U.S. equity mutual fund data. In total, 36 mutual funds were chosen for the sample, 18 no-load funds and 18 load funds. The load funds, which consist of 12 front-end loads and 6 back-end loads, were adjusted for their respective load fees throughout the study based on the investment time period under consideration. After computing 10-year, 5-year, 2-year, and recession period Sharpe Ratios and four-factor alphas, it was determined that no-load mutual funds consistently outperformed load mutual funds in every time period considered. Based on these results, it can be concluded that managers of load funds did not reward their investors with superior returns relative to no-load funds. On average, investors would have been better off investing in no-load funds rather than load funds from December 2002 through December 2012.
