Abstract
The relationship between returns and risk factors are likely to vary depending on the investor's time horizon, but CAPM supposes homogenous expectations. A relatively new approach known as wavelet analysis takes may help to reduce that problem, incorporating different time scales. Taking advantage of that, this paper aims to verify the differences in performance of Brazilian ETFs and mutual funds, according to benchmark, management style and time scale. We have wavelet decomposed share returns of Brazilian ETFs, returns of the five main Brazilian mutual funds categories and the returns of the Brazilian Market proxy into 7 time scales. Then, we estimate an extended-CAPM in each time scale. We found that there are considerable performance/pricing differences between fund/ETFs categories, which are linked to the time horizon assumed.
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