scholarly journals Mutual funds behavior and risk-adjusted performance in Nigeria

2021 ◽  
Vol 18 (3) ◽  
pp. 277-294
Author(s):  
Joshua Odutola Omokehinde
Keyword(s):  
Mutual Funds ◽  
Portfolio Performance ◽  
Average Risk ◽  
Negative Effects ◽  
Market Returns ◽  
Significance Level ◽  
Fund Managers ◽  
Portfolio Returns ◽  
Normality Test ◽  
Risk Free Rate

The paper investigates the behavior of mutual funds and their risk-adjusted performance in the financial markets of Nigeria between April 2016 and May 31, 2019, using descriptive statistics, as well as CAPM, Jensen’s alpha, and other risk-adjusted portfolio performance measures such as Sharpe and Treynor ratios, as well as Fama decomposition of return. The descriptive tests revealed that 80.77% of the funds were superior to market returns, while 13.46% were riskier. The market and the fund returns behaved abnormally with asymptotic and leptokurtic characteristics as their skewness and kurtosis varied from the normal requirements. Diagnostically, the normality test by Jacque-Berra showed that the return was not normally distributed at a 1% significance level. The market was more aggressive relative to the funds. The average risk-free rate was 6.75% above the market’s return. The risk-adjusted portfolio returns measured by Sharpe and Treynor ratios showed that 67.31% of the funds underperformed the market compared to 40.38% that outperformed the market using Jensen’s alpha. Fama decomposition of return revealed that the fund managers are risk-averse with 48% superior selection ability and rationally invested over 85% of investors’ funds in schemes with fixed income securities at a given risk-free return that cushioned the negative effects of the systematic and idiosyncratic risks and consequently threw the total returns into positive territories. Overall, the fund managers possessed 52% of inferior selection abilities that only earned 33% of superior risk-adjusted returns and hence, failed to achieve the desired diversification in the relevant period.

scholarly journals CHARACTERISTICS OF OMEGA-OPTIMIZED PORTFOLIOS AT DIFFERENT LEVELS OF THRESHOLD RETURNS

2014 ◽  
Vol 12 (2) ◽  
pp. 245-265 ◽  
Author(s):  
Renaldas Vilkancas
Keyword(s):  
Portfolio Optimization ◽  
Risk Measures ◽  
High Threshold ◽  
Portfolio Performance ◽  
Threshold Values ◽  
Portfolio Returns ◽  
Upside Risk ◽  
And Performance ◽  
Risk Free Rate ◽  
Different Levels

There is little literature considering effects that the loss-gain threshold used for dividing good and bad outcomes by all downside (upside) risk measures has on portfolio optimization and performance. The purpose of this study is to assess the performance of portfolios optimized with respect to the Omega function developed by Keating and Shadwick at different levels of the threshold returns. The most common choices of the threshold values used in various Omega studies cover the risk-free rate and the average market return or simply a zero return, even though the inventors of this measure for risk warn that “using the values of the Omega function at particular points can be critically misleading” and that “only the entire Omega function contains information on distribution”. The obtained results demonstrate the importance of the selected values of the threshold return on portfolio performance – higher levels of the threshold lead to an increase in portfolio returns, albeit at the expense of a higher risk. In fact, within a certain threshold interval, Omega-optimized portfolios achieved the highest net return, compared with all other strategies for portfolio optimization using three different test datasets. However, beyond a certain limit, high threshold values will actually start hurting portfolio performance while meta-heuristic optimizers typically are able to produce a solution at any level of the threshold, and the obtained results would most likely be financially meaningless.

scholarly journals Finding The Beta For A Portfolio Isn't Obvious: An Educational Example

2018 ◽  
Vol 11 (1) ◽  
pp. 15-22 ◽  
Author(s):  
James Chong ◽  
William P. Jennings ◽  
G. Michael Phillips
Keyword(s):  
Linear Combination ◽  
Mutual Funds ◽  
Fixed Number ◽  
Market Returns ◽  
Change Over Time ◽  
Usual Practice ◽  
Portfolio Returns ◽  
Regression Techniques ◽  
Alternative Approaches ◽  
Over Time

When a portfolio is not actively managed to maintain a fixed investment percentage in each asset but rather maintains a fixed number of shares for each asset, the portfolio weights will change over time because the market returns of the different assets will not be the same.  Consequently, portfolio betas computed as a linear combination of asset betas, which is the usual practice, will be different from betas computed using regression techniques on portfolio returns as is done when evaluating individual assets and mutual funds.  The alternative approaches can result in quite different beta statistics and, consequently, inconsistent decisions depending on which method is used. 

scholarly journals Arch Effects in Multifactor Market-Timing Models of Polish Mutual Funds

2012 ◽  
Vol 10 (2) ◽  
pp. 60-80
Author(s):  
Joanna Olbryś
Keyword(s):  
Mutual Funds ◽  
Stock Exchange ◽  
Market Timing ◽  
Market Returns ◽  
Fund Managers ◽  
Warsaw Stock Exchange ◽  
Q Model ◽  
Traditional Performance ◽  
Timing Models ◽  
Stock Picking

Arch Effects in Multifactor Market-Timing Models of Polish Mutual FundsPerformance measurement of investment managers is a topic of interest to practitioners and academics alike. The traditional performance evaluation literature has attempted to distinguish stock-picking ability (selectivity) from the ability to predict overall market returns (market-timing). However, the literature finds that it is not easy to separate ability into two such dichotomous categories. To overcome these problems multifactor alternative market-timing models have been proposed. The author's recent research provides evidence of strong ARCH effects in the market-timing models of Polish equity open-end mutual funds. For this reason, the main goal of this paper is to present the regression results of the new GARCH(p, q) versions of market-timing models of these funds. We estimate multifactor extensions of classical market-timing models with Fama & French's spread variables SMB and HML, and Carhart's momentum factor WML. We also include lagged values of the market factor as an additional independent variable in the regressions of the models because of the pronounced "Fisher effect" in the case of the main Warsaw Stock Exchange indexes. The market-timing and selectivity abilities of fund managers are evaluated for the period January 2003-December 2010. Our findings suggest that the GARCH(p, q) model is suitable for such applications.

scholarly journals Empirical Testing of Capital Asset Pricing Model on Bahrain Bourse

2015 ◽  
Vol 7 (2) ◽  
pp. 107 ◽  
Author(s):  
Iqbal Thonse Hawaldar
Keyword(s):  
Rate Of Return ◽  
Standard Theory ◽  
Capital Asset Pricing ◽  
Test Results ◽  
Market Returns ◽  
Portfolio Returns ◽  
Capm Model ◽  
Risk Free Rate ◽  
The Relationship ◽  
Free Rate

<p>The study is undertaken to find out the relationship between portfolio returns and market returns and test the empirical validity of the standard CAPM model on Bahrain Bourse. The study is based on 39 companies listed in the Bahrain Bourse, Bahrain All Share Index as market proxy and yield of Government of Bahrain securities as risk free rate of return. The study covers period from January 1, 2011 to December 31, 2014.  The analysis of the results of the study revealed that many of the independent variables together with beta can explain the portfolio returns.  However, the intercept test reveals that the portfolio returns are equal to the risk-free rate of return. Therefore, we can conclude that the results of intercept test of standard CAPM proves the theory and the beta test results goes against the standard theory.  </p>

Global real estate mutual funds: regional exposure and forecasting skill

2014 ◽  
Vol 10 (2) ◽  
pp. 168-179 ◽  
Author(s):  
Javier Rodríguez ◽  
Herminio Romero
Keyword(s):  
Real Estate ◽  
Mutual Funds ◽  
Design Methodology ◽  
Investment Strategy ◽  
Economic Conditions ◽  
Portfolio Performance ◽  
Content Type ◽  
Fund Managers ◽  
Time Period ◽  
Fund Return

Purpose – The purpose of this paper is to examine the risk-adjusted performance of US-based global real estate mutual funds (GREMFs) with emphasis on their ability to manage their domestic and foreign portfolios exposures. Design/methodology/approach – The paper applies common econometric measures of portfolio performance and implements a non-traditional methodology called attribution returns to measure forecasting ability. In this setting the paper compares the actual monthly fund return to what would have been earned by the set of indices that best reflects the fund's investment strategy during the previous month. Performance and forecasting ability is examined during two different time periods: 2001-2005 and 2006-2010. Findings – It is found that global real estate fund managers outperform the market and show good forecasting ability during the 2001-2005 time period. Good forecasting ability translates to positive risk-adjusted performance, as attribution returns are positively correlated with α. Originality/value – Despite the significant growth in the number of US-based GREMFs and the ample coverage these funds receive in the popular press, few studies are solely devoted to the examination of these funds. In this study the paper empirically examines the ability of fund managers to successfully forecast country/regional political and economic conditions as well as fluctuations in currency exchanges rates brought about by the changes they made to their portfolios’ domestic and foreign exposures.

scholarly journals Risk, return & performance evaluation of selected mutual fund schemes – a study on large & mid cap funds

2012 ◽  
Vol 1 (4) ◽  
pp. 348-362
Author(s):  
Krunal K Bhuva ◽  
Ashok R. Bantwa
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Academic Research ◽  
Fund Performance ◽  
Stock Selection ◽  
Market Returns ◽  
Fund Managers ◽  
Risk Return ◽  
Long Run ◽  
Better Than

This paper studies the persistence of mutual fund performance. Academic research oftenfocuses on fund returns. This study intends to examine the performance of selected Large cap and Mid capmutual fund schemes of Indian Mutual fund industry during the study period 2007 to 2011. The performanceof selected schemes is evaluated in terms of average returns, systematic risk, and unsystematic risk and byusing different measures like: Sharpe, Jenson, Treynor and FAMA. After detailed analysis it is found thatexcept two all the sampled schemes have performed better than market. Supporting the establishedrelationship of high risk - high return, better performing schemes are exposed to higher risk. The findings alsorevealed that majority of the schemes were adequately diversified and about 60% of the schemes were able tobeat the market with help of better stock selection skill of fund managers. Finding from the t-test calculationsshows that there is no difference between returns from large cap mid cap mutual funds in long run. From thereturn comparison of mutual funds and market, in 2008 & 2011 large cap are underperforming than marketand in 2011 only mid cap mutual funds are showing less return than market returns.

scholarly journals The Effect of Trading Activity and Holdings Market Capitalization on Portfolio Performance

2018 ◽  
Vol 10 (8) ◽  
pp. 18
Author(s):  
Pei Lin Deng
Keyword(s):  
Mutual Funds ◽  
Recent Decade ◽  
Empirical Literature ◽  
Portfolio Performance ◽  
Investment Strategies ◽  
Trading Activity ◽  
Fund Managers ◽  
Stock Portfolios ◽  
Focus Type ◽  
Performance Penalty

This paper augments a growing body of empirical literature on the turnover-return relationship of stock portfolios. From quarterly data over the recent decade, mutual funds that focus on smaller cap stocks are found to pay a greater performance penalty for active trading compared to those that focus on larger cap stocks. On average, managers in every fund focus type make investment decisions that benefit gross returns. However, detriment from excessive trading arises due to transaction costs. They are especially magnified for mutual funds that focus on smaller cap stocks. Findings herein also support previous studies that show fund managers execute lower-quality trades with tenure. The presented effect modification of trading activity by holdings focus type and manager tenure may be leveraged to refine portfolio investment strategies.

A Critical Analysis of Selected Public and Private Mutual Fund Schemes in India

2019 ◽  
Vol 118 (8) ◽  
pp. 28-34
Author(s):  
Dr. V. Murali Krishna ◽  
Dr T. Hima Bindu ◽  
Dr. Ravikumar Gunakala
Keyword(s):  
Mutual Funds ◽  
Capital Market ◽  
Mutual Fund ◽  
Portfolio Diversification ◽  
Financial Intermediaries ◽  
Public And Private ◽  
Fund Managers ◽  
Fixed Base ◽  
Banking Institutions ◽  
Different Levels

Mutual Fund Industry is one of the emerged dominant financial intermediaries in Indian Capital Market. The main objective of investing in a mutual fund is to diversify risk. Though the mutual fund invests in diversified portfolio, the fund managers take different levels of risk in order to achieve the schemes objectives. Mutual funds allow portfolio diversification and relative risk management through collection of funds from the savers/investors, the same investing in equity and debt stocks. This type of invested funds is managed by professional experts called as fund managers Funds are categorized as income should fixed base in India are a kind of mutual fund which makes investment in debt securities that have been issued to the corporate, banking institutions and to government in general

Robust Benchmarking of Indian Mutual Funds-A Partial Frontier Approach

2015 ◽  
Vol 5 (2) ◽  
Author(s):  
Ram Pratap Sinha
Keyword(s):  
Decision Making ◽  
Performance Evaluation ◽  
Mutual Funds ◽  
Mutual Fund ◽  
Multi Criteria Decision Making ◽  
Risk Framework ◽  
Programming Techniques ◽  
Risk Free Rate ◽  
Risk Ratios ◽  
Free Rate

Performance analysis of mutual funds is usually made on the basis of return-risk framework. Traditionally, excess return (over risk-free rate) to risk ratios were used for the purpose mutual fund evaluation. Subsequently, the application of non-parametric mathematical programming techniques in the context of performance evaluation facilitated multi-criteria decision making. However,the estimates of performance on the basis of conventional programming techniques like DEA and FDH are affected by the presence of outliers in the sample observations. The present, accordingly uses more robust benchmarking techniques for evaluating the performance od sectoral mutual fund schemes based on observations for the second half of 2010. The USP of the present study is that it uses two partial frontier techniques (Order-m and Order- a) which are less susceptible to the problem of extreme data.

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