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Don't Take Their Word for It: The Misclassification of Bond Mutual Funds by HUAIZHI CHEN; LAUREN COHEN; UMIT G. GURUN is a Economics, Econometrics and Finance article available to read on EtoBox.

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## ABSTRACT We provide evidence that bond fund managers misclassify their holdings, and that these misclassifications have a real and significant impact on investor capital flows. The problem is widespread, resulting in up to 31.4% of funds being misclassified with safer profiles, compared to their true, publicly reported holdings. “Misclassified funds”—those that hold risky bonds but claim to hold safer bonds—appear to on‐average outperform lower risk funds in their peer groups. Within category groups, misclassified funds receive more Morningstar stars and higher investor flows. However, when we correctly classify them based on actual risk, these funds are mediocre performers.

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Author

HUAIZHI CHEN; LAUREN COHEN; UMIT G. GURUN

Publisher

Wiley

Published

2021

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)