Glenn Pettengill

The Relation between Market Value, Past Performance and Extreme Returns of Common Stocks in the United States, 1926-2012

We study the interrelation between the size and winner-loser effects in U.S. stock returns, including their response to extreme returns. We find that size effect and winner-loser effect are present in data up to 2012. These are related but separate effects. However these effects are due to presence of a small number of extreme return observations in the sample. The size effect and winner-loser effects are non-existent after extreme returns are removed from the sample. Our results question the existence of size and winner-loser anomalies in the market efficiency literature.

Identifying the Value Premium: A Test of Mutual Fund Performance Measures

This paper extends recent discussion on the effectiveness of mutual fund performance measures. We utilize the well-known value premium to examine the ability of mutual fund performance measures to distinguish between the results of value funds and growth funds. Specifically, we examine the effectiveness of mutual fund performance measures over a sample period where value outperforms growth without question, where such measures ought to identify the superior performance of value funds. We find that the Capital Asset Pricing Model successfully identifies superior performance of value funds. The Fama-French three-factor model, on the other hand, provides an inaccurate comparison. We conclude that measurement using the Fama-French three-factor model is biased against value funds and should not be used to judge the performance of value funds, or in general, funds containing a significant proportion of value securities. We suggest that a similar bias would exist for mutual funds holding small-firm securities.