Journal of Financial and Quantitative Analysis

Research Articles

The Performance of Corporate Bond Mutual Funds: Evidence Based on Security-Level Holdings

Gjergji Cicia1 and Scott Gibsona1

a1 Mason School of Business, College of William and Mary, PO Box 8795, Williamsburg, VA 23187. Cici also holds a Research Fellow position at the Centre for Financial Research (CFR), University of Cologne., and


This is the first study of corporate bond mutual fund performance that examines detailed security-level holdings and returns. The new database allows us to decompose the costs and benefits of active management. In contrast to prior research on equity funds that shows evidence of stock-selection ability, we do not find evidence consistent with bond fund managers, on average, being able to select corporate bonds that outperform other bonds with similar characteristics. We find neutral to weakly positive evidence of ability to time corporate bond characteristics. Overall results show that the costs of active management on average appear larger than the benefits.

(Online publication January 04 2012)


We thank Christopher Blake (the referee) and Stephen Brown (the editor) for helpful comments and suggestions. We also thank Fabio Moneta and discussants and participants at the 2010 Conference of Financial Intermediation Research Society and the 2011 American Finance Association meeting. We alone are responsible for any remaining errors.