The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US.

In this paper, we propose an alternative fund rating approach based on the Expected Utility-Entropy (EU-E) decision model, in which the measure of risk for a risky action was axiomatically developed by Luce et al. We examine the ability of this approach as an alternative fund rating approach for its...

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Main Authors:	Daniel Chiew, Judy Qiu, Sirimon Treepongkaruna, Jiping Yang, Chenxiao Shi
Format:	Article
Language:	English
Published:	Public Library of Science (PLoS) 2019-01-01
Series:	PLoS ONE
Online Access:	https://doi.org/10.1371/journal.pone.0215320

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spelling	doaj-16635fc4f25f421f9a9ef6be0fd399112021-03-03T20:43:45ZengPublic Library of Science (PLoS)PLoS ONE1932-62032019-01-01144e021532010.1371/journal.pone.0215320The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US.Daniel ChiewJudy QiuSirimon TreepongkarunaJiping YangChenxiao ShiIn this paper, we propose an alternative fund rating approach based on the Expected Utility-Entropy (EU-E) decision model, in which the measure of risk for a risky action was axiomatically developed by Luce et al. We examine the ability of this approach as an alternative fund rating approach for its ability to potentially mitigate the drawbacks of the risk measure used in Morningstar ratings, and investigate the ability of the EU-E model based and Morningstar ratings to predict mutual fund performance. Overall, we find that the risk measure used in both models plays a defining role in their ability to predict future fund performance, and that the EU-E model can effectively consider the behavioral decisions of an investor.https://doi.org/10.1371/journal.pone.0215320
collection	DOAJ
language	English
format	Article
sources	DOAJ
author	Daniel Chiew Judy Qiu Sirimon Treepongkaruna Jiping Yang Chenxiao Shi
spellingShingle	Daniel Chiew Judy Qiu Sirimon Treepongkaruna Jiping Yang Chenxiao Shi The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US. PLoS ONE
author_facet	Daniel Chiew Judy Qiu Sirimon Treepongkaruna Jiping Yang Chenxiao Shi
author_sort	Daniel Chiew
title	The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US.
title_short	The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US.
title_full	The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US.
title_fullStr	The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US.
title_full_unstemmed	The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US.
title_sort	predictive ability of the expected utility-entropy based fund rating approach: a comparison investigation with morningstar ratings in us.
publisher	Public Library of Science (PLoS)
series	PLoS ONE
issn	1932-6203
publishDate	2019-01-01
description	In this paper, we propose an alternative fund rating approach based on the Expected Utility-Entropy (EU-E) decision model, in which the measure of risk for a risky action was axiomatically developed by Luce et al. We examine the ability of this approach as an alternative fund rating approach for its ability to potentially mitigate the drawbacks of the risk measure used in Morningstar ratings, and investigate the ability of the EU-E model based and Morningstar ratings to predict mutual fund performance. Overall, we find that the risk measure used in both models plays a defining role in their ability to predict future fund performance, and that the EU-E model can effectively consider the behavioral decisions of an investor.
url	https://doi.org/10.1371/journal.pone.0215320
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The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US.

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