Equity fund performance

2016 ◽  
Vol 33 (3) ◽  
pp. 359-376 ◽  
Author(s):  
Bin Liu ◽  
Amalia Di Iorio ◽  
Ashton De Silva
Keyword(s):  
Explanatory Power ◽  
Fund Performance ◽  
Idiosyncratic Volatility ◽  
Size Factor ◽  
Momentum Effect ◽  
Content Type ◽  
Fund Managers ◽  
Equity Funds ◽  
Fama And French ◽  
Fund Size

Purpose This paper aims to investigate whether idiosyncratic volatility is priced in returns of equity funds while controlling for fund size and return momentum. Design/methodology/approach Following Fama and French (1993), an idiosyncratic volatility mimicking factor and a fund-size factor are constructed. The pricing ability of this idiosyncratic volatility mimicking factor is investigated in the context of Carhart (1997). Findings Idiosyncratic volatility is an important pricing factor even when controlling for fund size and momentum. In addition, idiosyncratic volatility is strongly and positively associated with the momentum effect. Further, when controlling for the association between the momentum effect and idiosyncratic volatility, the explanatory power of the momentum factor almost disappears, which suggests the pricing of idiosyncratic volatility mediates momentum and returns. Originality/value These findings imply that both the idiosyncratic volatility factor and the fund-size factor should not be ignored by fund managers when evaluating the performance of the equity funds.

Applying the Fama and French three-factor model to analyze risk/reward in the Spanish REITs: an ARDL approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zhenyu Su ◽  
Paloma Taltavull
Keyword(s):  
Growth Rate ◽  
Factor Model ◽  
Explanatory Power ◽  
Gdp Growth ◽  
Size Factor ◽  
Content Type ◽  
Gdp Growth Rate ◽  
Fama And French ◽  
Three Factor

Purpose This paper aims to analyse the risk and excess returns of the Spanish real estate investment trusts (S-REITs) using various methods, though focusing primarily on the Fama-French three-factor (FF3) model, over the period from 2007Q3 to 2017Q2. Design/methodology/approach The autoregressive distributed lag model is used for the empirical analysis to test long-term stable relationships between variables. Findings The findings indicate that the FF3 model is suitable for the S-REITs market, better explaining the S-REITs’ returns variation than the traditional single-index capital asset pricing model (CAPM) and the Carhart four-factor model. The empirical evidence is reasonably consistent with the FF3 model; the values for the market, size and value are highly statistically significant over the analysis period, with 68.7% variation in S-REITs’ returns explained by the model. In the long run, the market factor has less explanatory power than the size and value factors; the positive long-term multiplier of the size factor indicates that small S-REIT companies have higher returns, along with higher risk, while the negative multiplier of the value indicator suggests that S-REITs portfolios prefer to allocate growth REITs with low book-to-market ratios. The empirical findings from a modified FF3 model, which additionally incorporates Spain’s gross domestic product (GDP) growth rate, two consumer price index (CPI) macro-factors and three dummy variables, indicates that GDP growth rate and CPI also affect S-REITs’ yields, while investment funds with capital calls have a small influence on S-REITs’ returns. Practical implications The regression results of the standard and extended FF3 model can help researchers understand S-REITs’ risk and return through a general stock pattern. Potential investors are given more information to consider the new Spanish investment vehicle before making a decision. Originality/value The paper uses standard techniques but applies them for the first time to the S-REIT market.

Private Equity Fund Performance and Persistency by Fund Type

2014 ◽  
Vol 22 (3) ◽  
pp. 531-564
Author(s):  
IK Song ◽  
Ji Eun Kang ◽  
Chang Hyun Yun
Keyword(s):  
Private Equity ◽  
Fund Performance ◽  
Equity Fund ◽  
Private Equity Fund ◽  
Fund Managers ◽  
Stock Market Performance ◽  
Equity Funds ◽  
Performance Persistency ◽  
Private Equity Funds ◽  
Fund Size

This study investigates the private equity funds’ performances and persistence by fund type. Diversification benefit exists between public equity and private equity and among different types of private equity funds. The net IRR of private equity funds depends on fund type, economic growth, stock market performance, inflation and interest rate. Fund performance was negatively correlated with capital inflow to private equity market and fund size. Fund size and series are positively correlated. Performance persistency exists in private equity fund managers. Fund type is very important factor in analyzing private equity fund performance and persistency.

scholarly journals Comparing the determinants of fund flows in domestically managed Malaysian Islamic and conventional equity funds

2018 ◽  
Vol 9 (3) ◽  
pp. 401-414 ◽  
Author(s):  
Jaizah Othman ◽  
Mehmet Asutay ◽  
Norhidayah Jamilan
Keyword(s):  
Empirical Evidence ◽  
Fund Flows ◽  
Policy Makers ◽  
Content Type ◽  
Expense Ratio ◽  
Fund Managers ◽  
Fund Flow ◽  
Equity Funds ◽  
Key Factor ◽  
Fund Size

PurposeThis paper aims to provide an empirical evidence on the fund flows-past return performance relationship by also considering the management expense ratio, the portfolio turnover, the fund size and the fund age of Islamic equity funds (IEF) investors in comparison with conventional equity funds (CEF) investors. Design/methodology/approachBy using panel data, the sample of Malaysian domestic managed equity funds is considered which comprises 20 individual funds from IEF and CEF from 2011 to 2013. FindingsThe results provide evidence that IEF investors have different factors when choosing funds in comparison with CEF investors. The study finds that the key factor influencing the fund flows of IEF is the management expense ratio, compared to the CEF which is fund size. This study also shows that all the fund characteristics of IEF and CEF are positively or negatively related to the fund flows. Research limitations/implicationsThe present study may be extended by considering other fund categories such as the money market fund, the balanced fund, the bond fund and the fixed income fund. Practical implicationsThe empirical findings of this paper clearly call for fund managers and investors to review their investment policy. The results could also provide better information and guidance for investors as well policy makers on the factors that affect the fund flow for Malaysian Islamic funds and CEF. Originality/valueThis paper is among the earliest empirical evidence studies on the fund flows-past return performance relationship by focusing in a comparative manner on IEF investors and CEF investors in Malaysia.

Fund Manager Performance in Emerging Market: Factor Specialisation and Financial Crisis Impact

2018 ◽  
Vol 17 (1) ◽  
pp. 130-158
Author(s):  
Giuseppe Galloppo ◽  
Mauro Aliano
Keyword(s):  
Mutual Fund ◽  
Emerging Market ◽  
Explanatory Power ◽  
Tracking Error ◽  
Active Management ◽  
Market Model ◽  
Good Representation ◽  
Local Factor ◽  
Equity Funds ◽  
Fama And French

In the branch of literature dealing with analysis of the consistency of management styles, this article investigates the relation between portfolio concentration and the performance of emerging market equity funds. Unlike previous studies, on global and US mutual fund, we focus on emerging markets equity, finding funds with higher levels of tracking error, display lower performance than funds with less diversified portfolios when we do not take into account specific concentration in holdings in different multifactor style. The explanatory power of local models that use local explanatory returns is recently investigated by De Groot, Pang and Swinkels (2012), Cakici, Fabozzi and Tan (2013) and Fama and French (2012). Following the same research line, the most remarkable finding of this article is that the fund-picking process, only based on the level of track error from a broad benchmark, can contribute to disappointing results when it is not also accompanied by information about the fund concentration in multiple market segment. According to the previous work, overall, we found that local factor market model provides quite good representation of local average returns for portfolios formed on size and style factors. The contribution of this research is two-fold. First, we examined emerging market funds from the perspective of active management and second, under the effect of strategies mentioned in Huij and Derwall (2011). Moreover, as additional analysis with respect to most of the previous papers, we also tested the effects of the crisis that we found to have not affected the main result.

Revisiting Fama–French’s asset pricing model with an MCB volatility risk factor

2020 ◽  
Vol 21 (3) ◽  
pp. 233-251
Author(s):  
Xiaoying Chen ◽  
Nicholas Ray-Wang Gao
Keyword(s):  
Risk Factor ◽  
Asset Pricing ◽  
Explanatory Power ◽  
Investor Sentiment ◽  
Size Factor ◽  
Pricing Model ◽  
Volatility Risk ◽  
Content Type ◽  
Asset Pricing Model ◽  
Market Factor

Purpose Since the introduction of VIX to measure the spot volatility in the stock market, VIX and its futures have been widely considered to be the standard of underlying investor sentiment. This study aims to examine how the magnitude of contango or backwardation (MCB volatility risk factor) derived from VIX and VIX3M may affect the pricing of assets. Design/methodology/approach This paper focuses on the statistical inference of three defined MCB risk factors when cross-examined with Fama–French’s five factors: the market factor Rm–Rf, the size factor SMB (small minus big), the value factor HML (high minus low B/M), the profitability factor RMW (robust minus weak) and the investing factor CMA (conservative minus aggressive). Robustness checks are performed with the revised HML-Dev factor, as well as with daily data sets. Findings The inclusions of the MCB volatility risk factor, either defined as a spread of monthly VIX3M/VIX and its monthly MA(20), or as a monthly net return of VIX3M/VIX, generally enhance the explanatory power of all factors in the Fama and French’s model, in particular the market factor Rm–Rf and the value factor HML, and the investing factor CMA also displays a significant and positive correlation with the MCB risk factor. When the more in-time adjusted HML-Dev factor, suggested by Asness (2014), replaces the original HML factor, results are generally better and more intuitive, with a higher R2 for the market factor and more explanatory power with HML-Dev. Originality/value This paper introduces the term structure of VIX to Fama–French’s asset pricing model. The MCB risk factor identifies underlying configurations of investor sentiment. The sensitivities to this timing indicator will significantly relate to returns across individual stocks or portfolios.

Evaluating alternative performance benchmarks for Indian mutual fund industry

2017 ◽  
Vol 14 (2) ◽  
pp. 222-250 ◽  
Author(s):  
Sanjay Sehgal ◽  
Sonal Babbar
Keyword(s):  
Asset Pricing ◽  
Mutual Fund ◽  
Factor Model ◽  
Five Factor Model ◽  
Content Type ◽  
Asset Pricing Model ◽  
Fund Managers ◽  
Asset Pricing Models ◽  
Performance Benchmarks ◽  
Fama And French

Purpose The purpose of this paper is to perform a relative assessment of performance benchmarks based on alternative asset pricing models to evaluate performance of mutual funds and suggest the best approach in Indian context. Design/methodology/approach Sample of 237 open-ended Indian equity (growth) schemes from April 2003 to March 2013 is used. Both unconditional and conditional versions of eight performance models are employed, namely, Jensen (1968) measure, three-moment asset pricing model, four-moment asset pricing model, Fama and French (1993) three-factor model, Carhart (1997) four-factor model, Elton et al. (1999) five-index model, Fama and French (2015) five-factor model and firm quality five-factor model. Findings Conditional version of Carhart (1997) model is found to be the most appropriate performance benchmark in the Indian context. Success of conditional models over unconditional models highlights that fund managers dynamically manage their portfolios. Practical implications A significant α generated over and above the return estimated using Carhart’s (1997) model reflects true stock-picking skills of fund managers and it is, therefore, worth paying an active management fee. Stock exchanges and credit rating agencies in India should construct indices incorporating size, value and momentum factors to be used for purpose of benchmarking. Originality/value The study adds new evidence as to applicability of established asset pricing models as performance benchmarks in emerging market India. It examines role of higher order moments in explaining mutual fund returns which is an under researched area.

Do mutual fund managers' possess style liquidity timing abilities?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahfooz Alam ◽  
Valeed Ahmad Ansari
Keyword(s):  
Mutual Fund ◽  
Factor Model ◽  
Market Timing ◽  
Market Liquidity ◽  
Content Type ◽  
Fund Managers ◽  
Indian Context ◽  
Equity Mutual Funds ◽  
Equity Funds ◽  
Style Timing

PurposeThis paper investigates the style timing and liquidity style timing vis-à-vis the market, size, value and momentum factors of the actively managed Indian equity mutual funds.Design/methodology/approachWe examine the style timing of the funds using the augmented Carhart four-factor model by incorporating timing measures (Treynor and Mazuy; Henriksson and Merton). Based on this, the study explores the four-factor liquidity and volatility style timing exhibited by fund managers. The sample is from April 2000 to March 2018 and spans the volatile 2008 subprime economic crises. The sample comprised 182 actively managed equity funds from various sizes and was considered to be a well-diversified sample.FindingsThe results of our study provide strong evidence of market liquidity timing in India. No other style timing skills are observed in our analysis. Our results also imply that the fund managers might misidentify size timing as market timing if integrated liquidity timing measures are not employed, leading to false conclusions.Research limitations/implicationsThe findings of our study imply that the fund managers might misidentify size timing as market timing if integrated liquidity timing measures are not employed, leading to false conclusions.Originality/valueThis study, to our knowledge, is the first attempt to investigate the portfolio-based style timing in the Indian context.

Adjusting for risk factors in mutual fund performance and performance persistence

2019 ◽  
Vol 20 (4) ◽  
pp. 352-369 ◽  
Author(s):  
Drosos Koutsokostas ◽  
Spyros Papathanasiou ◽  
Dimitris Balios
Keyword(s):  
Risk Factors ◽  
Mutual Funds ◽  
Mutual Fund ◽  
Nonparametric Tests ◽  
Performance Measure ◽  
Performance Persistence ◽  
Momentum Effect ◽  
Content Type ◽  
Equity Mutual Funds ◽  
Fama And French

Purpose The purpose of this paper is to examine the performance of Greek equity mutual funds and the persistence in annual performance for the period 2008-2017 by using a variety of performance models. Design/methodology/approach Using all the available funds in operation and daily data, the authors apply single-index (Jensen, 1968) and multi-factor models (Fama and French, 1993; Carhart, 1997) to measure risk-adjusted returns. To assess performance persistence, a series of parametric (Bollen and Busse, 2005) and nonparametric tests (Malkiel, 1995; Brown and Goetzmann, 1995; Kahn and Rudd, 1995) is implemented. Findings Results show that the Greek equity mutual funds perform, on average, worse than the market index, irrespective of the performance measure applied, and the estimations obtained by the models are similar. Few managers that followed large-cap strategies, pursued stocks with high book-to-market value ratio and eliminated their exposure to the momentum effect were able to add value to their portfolios. Furthermore, a winner-picking strategy based on sustained superior performers is questioned. However, assigning fund returns to the corresponding risk factors results in the partial disappearance of persistence in performance. Originality/value The sample period includes the turbulent period, following the introduction of capital controls, which affected capital flows significantly. Moreover, the application of multiple performance measures enables us to investigate performance persistence in a wider spectrum.

Mutual fund manager turnover: an empirical investigation of performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Avinash Ghalke ◽  
Shripad Kulkarni
Keyword(s):  
Mutual Fund ◽  
Emerging Market ◽  
Investment Strategy ◽  
Fund Performance ◽  
Fund Manager ◽  
Content Type ◽  
Fund Managers ◽  
Fund Families ◽  
Study Methodology ◽  
Factor Alpha

PurposeWhen a fund manager leaves, the investment strategy of the fund changes or remains the same. The departing fund manager's resignation is either forced or voluntary. The study investigates the relationship between the portfolio manager's transition and the fund's investment strategy and how the change affects the mutual fund returns in the subsequent period.Design/methodology/approachThe authors examine 148 fund manager changes in India between April 2005–March 2018 using three performance measures: abnormal return (fund return minus benchmark return), Jensen's alpha and Carhart four-factor alpha. The analysis includes an event study methodology, followed by a two-step Fama–MacBeth regression approach.FindingsContrary to the previous studies conducted in the developed markets, the authors find that fund performance improves irrespective of whether the fund manager change is forced or voluntary. The outperformance after the fund manager's exit is significant for funds belonging to the larger fund families.Originality/valueIn the context of investment management, the authors provide a conceptual framework to understand the effect of fund manager exit on mutual fund performance. The authors substantiate their arguments with empirical evidence. To the best of the authors' understanding, this is the first research to examine the effect of changing mutual fund managers in an emerging market setting.

Association between fund attributes and fund's performance: a panel data approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anurag Bhadur Singh ◽  
Priyanka Tandon
Keyword(s):  
Panel Data ◽  
Performance Measures ◽  
Mutual Fund ◽  
Fund Performance ◽  
Content Type ◽  
Turnover Ratio ◽  
Asset Value ◽  
Net Asset Value ◽  
Ultimate Objective ◽  
Fund Size

PurposeThe present study tries to explore the various fund attributes that influence the mutual fund performance. Further, study examined the effect of mutual fund attributes namely, Net Asset Value (NAV), Portfolio turnover ratio (PTR), fund size (AUM), expense ratio (ExpR) and fund age (Age) on mutual fund's performance using gross return and risk-adjusted performance measures.Design/methodology/approachThe study evaluated balanced panel data (short panel) comprising 81 Indian equity mutual fund schemes for the period of 2013–2019. The study estimated relationship between fund attributes (Net asset value, Portfolio turnover ratio, Fund age, fund size and Expense ratio) and fund performance (using gross return and risk-adjusted performance measures), through panel data regression using fixed-effects model as suggested by Hausman specification test on transformed data (due to high multicollinearity), with cluster-robust estimators due to the presence of heteroskedasticity in the model.FindingsThe findings of the study suggested that using gross return as fund performance measure, PTR, NAV, AUM, Age exhibit significant relationship with the fund performance whereas using risk-adjusted performance measures (Treynor ratio and Jensen alpha) NAV and ExpR significantly influences the fund performance. Identification of the significant relationship between fund characteristics and fund performance offers valuable insights to the investors and fund managers for rationally managing their portfolio with the ultimate objective of the wealth maximization.Research limitations/implicationsThe study considered only 81 equity mutual fund schemes. Some of the data were not available at the time of the study due to the policy of the company. The present study contributes significantly in examining the expected association between fund attributes and fund performance in the context of Indian mutual fund industry where this relationship were explored less.Practical implicationsThe findings of the present study will help the investors to take the rational investment decision with the ultimate objective of maximum return with minimal risk. The findings also offer significant germane to the stakeholders in making rational decision-making process.Originality/valueThere is dearth of study concerning the relationship between mutual fund characteristics and fund performance with respect to Indian mutual fund industry. Therefore, study provides valuable insights to the area of the portfolio selection and management with respect to Indian mutual funds.

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