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See detailThe predictive Power of Fund Ratings with a novel approach using uncertainty measures to analyzing risk
Terraza, Virginie UL; Toque, Carole UL

in Decisions in Economics & Finance (2009), 32(2), 149-160

Using two approaches to panel data, Granger causality analysis with semi-asymptotic tests, and a structural approach based on entropies measured on sequences of multi-period ratings and returns, we ... [more ▼]

Using two approaches to panel data, Granger causality analysis with semi-asymptotic tests, and a structural approach based on entropies measured on sequences of multi-period ratings and returns, we specify the relationship between a fund’s performance and both Morningstar and Europerformance ratings. We conclude on the Europerformance agency forecasting ability for the Luxembourg funds, and the Morningstar agency for the French funds. Indeed, we find two groups of funds depending on their domiciliation and appropriated rating. The results of this paper have implications for the management of fund portfolios, and the structural approach, more robust to our data, must be a first process for forecast models on the basis of similar funds, minor uncertainty or risk measure, and appropriated rating. [less ▲]

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