Regime-Switching Determinants of Mutual Fund Performance in South Africa

This study assesses the effect of fund-level and systemic factors on the performance of mutual funds in the context of changing market conditions. A Markov regime-switching model is used to analyze the performance of 33 South African equity mutual funds from 2006 to 2019. From the results, fund flow and fund size exert more predictive influences on performance in the bearish state of the market than in the bullish state. Fund age, fund risk, and market risk were found to be the most significant factors driving the performance of active portfolios under time-varying conditions of the market. These variables exert more influence on fund performance under bearish conditions than under bullish conditions, emphasizing the flight-to-liquidity assets phenomenon and risk-aversion behavior of fund contributors during unstable conditions of the market. Consequently, fund managers need to maintain adequate asset bases while implementing policies that minimize dispersions in fund returns to engender persistence in performance. This study provides novel perspectives on how the determinants of fund performance change with market conditions as portrayed by the adaptive market hypothesis (AMH).

Download Full-text

Do Mutual Funds Perform When It Matters Most to Investors? US Mutual Fund Performance and Risk in Recessions and Expansions

Quarterly Journal of Finance ◽

10.1142/s2010139211000146 ◽

2011 ◽

Vol 01 (03) ◽

pp. 607-664 ◽

Cited By ~ 89

Author(s):

Robert Kosowski

Keyword(s):

Mutual Funds ◽

Mutual Fund ◽

Regime Switching ◽

Factor Model ◽

Marginal Utility ◽

Value Added ◽

Fund Performance ◽

Fund Managers ◽

Switching Performance ◽

Equity Mutual Funds

This paper shows that the stylized fact of average mutual fund underperformance documented in the literature stems from expansion periods when funds have statistically significant negative risk-adjusted performance and not recession periods when risk-adjusted fund performance is positive. These results imply that traditional unconditional performance measures understate the value added by active mutual fund managers in recessions, when investors' marginal utility of wealth is high. The risk-adjusted performance (or alpha) difference between recession and expansion periods is statistically and economically significant at 3% to 5% per year. Our findings are based on a novel multi-variate conditional regime-switching performance methodology used to carry out one of the most comprehensive examinations of the performance of US domestic equity mutual funds in recessions and expansions from 1962 to 2005. The findings are robust to the choice of the factor model (including bond and liquidity factor extensions), the use of NBER business cycle dates, fund load, turnover, expenses and percentage of equity holdings.

Download Full-text

Mutual fund flow-performance dynamics under different market conditions in South Africa

Investment Management and Financial Innovations ◽

10.21511/imfi.18(1).2021.20 ◽

2021 ◽

Vol 18 (1) ◽

pp. 236-249

Author(s):

Richard Apau ◽

Paul-Francois Muzindutsi ◽

Peter Moores-Pitt

Keyword(s):

South Africa ◽

Mutual Funds ◽

Mutual Fund ◽

Fund Flows ◽

Past Performance ◽

Market Conditions ◽

Fund Flow ◽

Dynamic Relationship ◽

Equity Mutual Funds ◽

Performance Effects

Questions regarding the specific factors that drive continuous cash allocations by investors into portfolios of actively managed funds, despite consistent underperformance, continue to remain an inexhaustive aspect of the literature that calls for further investigations. This study assesses the dynamic relationship between fund flow and performance of equity mutual funds in South Africa under different market conditions. The study employs a GMM technique to analyze the panel data of 52 South African equity mutual funds from 2006 to 2019. The analysis found that convexity is prevalent in the flow-performance relationship, where fund contributors in subsequent periods allocate recent underperforming and outperforming funds disproportionate cash. This finding is evident in the lack of significance in the past performance effects on subsequent fund flows. The study found that lagged fund flows, fund size, fund risk, and market risk drive subsequent fund flows under changing conditions of the general market and fund markets. Overall, it is posited that fund contributors and asset administrators adapt to prevailing market dynamics relative to trading decisions. As a result, this affirms the normative guidelines of the Adaptive Markets Hypothesis, leading to the conclusion that exogenous factors drive fluctuations in fund flows in South Africa.

Download Full-text

Manager Tenure - Real Estate Mutual Fund (REMF) Versus Equity Mutual Fund Performance

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v11i1.7519 ◽

2012 ◽

Vol 11 (1) ◽

pp. 17

Author(s):

James L. Kuhle

Keyword(s):

Real Estate ◽

Mutual Funds ◽

Mutual Fund ◽

Fund Performance ◽

Font Size ◽

Mutual Fund Managers ◽

Fund Managers ◽

Equity Mutual Funds ◽

Overall Performance ◽

Real Estate Assets

Historically, mixed evidence has been reported suggesting that mutual fund managers exhibit superior returns based on the length of their tenure. Further, the result of tenure performance for real estate mutual fund managers has been reported with mixed results. Therefore, it is the purpose of this research to consider the effect of management tenure on the overall performance of various classes of equity mutual funds, including those funds that invest exclusively in real estate assets. These results are studied over periods of three, five, and ten-year manager tenure to determine if there is significantly better performance among various tenure groups.

Download Full-text

MANAGERIAL ABILITIES AND FACTOR INVESTMENT STYLE PERFORMANCES OF MALAYSIAN MUTUAL FUND MANAGERS

Journal of Nusantara Studies (JONUS) ◽

10.24200/jonus.vol6iss1pp118-135 ◽

2021 ◽

Vol 6 (1) ◽

pp. 118-135

Author(s):

Pick-Soon Ling ◽

Ruzita Abdul-Rahim

Keyword(s):

Mutual Funds ◽

Portfolio Management ◽

Mutual Fund ◽

Market Timing ◽

Stock Selection ◽

Investment Style ◽

Fund Managers ◽

Equity Mutual Funds ◽

Timing Ability ◽

Stock Picking

Background and Purpose: Studies focusing on mutual fund managerial abilities and investment style strategies are still scarce in the literature. Thus, this study aims to provide new evidence and insights into the managerial abilities and investment style performances of Malaysian fund managers. Methodology: A total of 444 Malaysian equity mutual funds (EMFs) were evaluated using Carhart’s model incorporated with Treynor-Mazuy (T-M) and Henriksson-Merton (H-M) market timing models for the study period, from January 1995 to December 2017. Findings: Fund managers displayed superior stock selection skills with 32 percent and 43 percent of funds for T-M and H-M respectively, with perverse market timing ability which accounted for 39 percent and 42 percent of funds for T-M and H-M respectively. Perverse timing ability had reduced the superior stock-picking skills of fund managers. This suggests that the EMFs performance could further improve if respective fund managers perform better in market timing ability. The finding also indicates that size effect (SMB) and value effect (HML) play significant roles in investment style strategies, while results of momentum factor (WML) propose that Malaysian fund managers have followed the contrarian strategy. Contributions: This study contributes in several ways especially in the literature of portfolio management as the evidence is obtained from the largest mutual funds sample size and the longest study period. Moreover, this study also used the highest frequency data to study the effects of market timing which were overlooked in previous studies. Keywords: Adjusted carhart, Malaysian market, market timing, mutual fund, stock selection. Cite as: Ling, P-S., & Abdul-Rahim, R. (2021). Managerial abilities and factor investment style performances of Malaysian mutual funds. Journal of Nusantara Studies, 6(1), 118-135. http://dx.doi.org/10.24200/jonus.vol6iss1pp118-135

Download Full-text

Mutual Fund Performance Using Unconditional Multifactor Models: Evidence from India

Journal of Emerging Market Finance ◽

10.1177/0972652718777056 ◽

2018 ◽

Vol 17 (2_suppl) ◽

pp. S157-S184 ◽

Cited By ~ 3

Author(s):

Pankaj K. Agarwal ◽

H. K. Pradhan

Keyword(s):

Mutual Fund ◽

Developed Countries ◽

Fund Performance ◽

Superior Performance ◽

Capital Asset Pricing ◽

Multifactor Models ◽

Asset Pricing Model ◽

Fund Managers ◽

Equity Mutual Funds ◽

Stock Picking

In contrast to developed countries, Indian capital markets do not exhibit strong efficiency and therefore it appears possible that fund managers beat the benchmarks. We examine the existence of superior performance of open-ended equity mutual funds in India with various models including traditional Capital Asset Pricing Model (CAPM)-based as well as recent Fama–French–Carhart (FFC)-factors-based models. We use a survivorship-bias free database including all schemes since inception till recently. We found evidence of stock picking and timing abilities in Indian fund managers. Our results are robust to changes in benchmarks, return frequency, and effects of heteroscedasticity and autocorrelation (HAC).

Download Full-text

Style and Skill: Hedge Funds, Mutual Funds, and Momentum

Management Science ◽

10.1287/mnsc.2019.3433 ◽

2020 ◽

Vol 66 (12) ◽

pp. 5505-5531 ◽

Cited By ~ 2

Author(s):

Mark Grinblatt ◽

Gergana Jostova ◽

Lubomir Petrasek ◽

Alexander Philipov

Keyword(s):

Mutual Funds ◽

Hedge Funds ◽

Mutual Fund ◽

Hedge Fund ◽

Fund Performance ◽

Short Sales ◽

Fund Managers ◽

Liquidity Provision ◽

Stock Picking ◽

Hedge Fund Performance

Classifying mandatory 13F stockholding filings by manager type reveals that hedge fund strategies are mostly contrarian, and mutual fund strategies are largely trend following. The only institutional performers—the two thirds of hedge fund managers that are contrarian—earn alpha of 2.4% per year. Contrarian hedge fund managers tend to trade profitably with all other manager types, especially when purchasing stocks from momentum-oriented hedge and mutual fund managers. Superior contrarian hedge fund performance exhibits persistence and stems from stock-picking ability rather than liquidity provision. Aggregate short sales further support these conclusions about the style and skill of various fund manager types. This paper was accepted by Tyler Shumway, finance.

Download Full-text

Liquidity, Investment Style, and the Relation between Fund Size and Fund Performance

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109000004270 ◽

2008 ◽

Vol 43 (3) ◽

pp. 741-767 ◽

Cited By ~ 131

Author(s):

Xuemin (Sterling) Yan

Keyword(s):

Mutual Funds ◽

Fund Performance ◽

Inverse Relation ◽

High Turnover ◽

Investment Style ◽

Equity Mutual Funds ◽

Fund Size

AbstractUsing stock transactions data along with detailed stockholdings for a comprehensive sample of U.S. actively managed equity mutual funds from 1993 to 2002, this paper empirically examines the effect of liquidity and investment style on the relation between fund size and fund performance. Consistent with Chen, Hong, Huang, and Kubik (2004), I find a significant inverse relation between fund size and fund performance. Further, this inverse relation is stronger among funds that hold less liquid portfolios. The inverse relation between fund size and fund performance is also more pronounced among growth and high turnover funds that tend to have high demands for immediacy. Overall, this paper's findings suggest that liquidity is an important reason why fund size erodes performance.

Download Full-text

Investing in the “New Economy”: Mutual Fund Performance and the Nature of the Firm

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109014000179 ◽

2014 ◽

Vol 49 (1) ◽

pp. 165-191 ◽

Cited By ~ 5

Author(s):

Swasti Gupta-Mukherjee

Keyword(s):

Stock Returns ◽

Mutual Funds ◽

Mutual Fund ◽

Small Firms ◽

Negative Impact ◽

New Economy ◽

Fund Performance ◽

Learning From Experience ◽

Fund Managers ◽

Physical Assets

AbstractAlthough stock returns of intangibles-intensive firms tend to exceed physical assets-intensive firms, risk-adjusted returns of actively managed mutual funds significantly decrease (increase) with their portfolios’ exposure to intangibles-intensive (physical assets-intensive) firms. Fund managers tend to exhibit skill when they focus on difficult-to-value (e.g., small) firms, except when the firms are intangibles-intensive. In sum, the worst-performing funds are in areas of the market that seem to offer ample opportunities for professional investors due to exacerbated mispricing. The negative impact of investments in intangibles-intensive firms on fund performance appears to be driven by extrapolation bias and decreases with learning from experience.

Download Full-text

The Impact of Macroeconomic Variables on Mutual Funds Performance in Ghana

International Journal of Scientific Research in Science Engineering and Technology ◽

10.32628/ijsrset218213 ◽

2021 ◽

pp. 34-53

Author(s):

Cai Li ◽

Rosemond Atampokah ◽

Helena Akolpoka ◽

Priscilla Avonie ◽

Baku R. Kwame

Keyword(s):

Mutual Funds ◽

Mutual Fund ◽

Fund Performance ◽

Foreign Portfolio Investment ◽

Macroeconomic Variables ◽

Macroeconomic Conditions ◽

Fund Managers ◽

The World ◽

World Champion ◽

The Impact

Development across the globe has been an agenda many citizens of the world champion irrespective of the area, sector or discipline within which it is being advocated. Politically, socially, and in the world of economics, mutual fund has gained significance within country’s economic environment. The phenomenal growth in the financial market of mutual funds can be attributed to the increase in the various financial schemes available, improvement in fund mobilization, as well as the growth of investments in the country. We examined the impact of macroeconomic variables on mutual fund performance of all mutual fund companies in Ghana over the period of 2008 to 2016. We performed correlation analysis, hence examined the co-movement of the returns from the selected funds with the key macroeconomic variables. We find macroeconomics variables positively affect the returns of funds. The effect comes by the amount of money available for investments. We further find exchange rate as the strongest macroeconomic variable affects the performance of mutual funds in Ghana. We established that Ghana receives a significant amount of foreign portfolio investment (FPI), where investors in other countries bring in their money to make investment on our financial markets. Our results provide evidence for fund managers on approach in dealing with macroeconomic conditions and its volatilities.

Download Full-text

Sub-Par Performance In A Sub-Prime World? A Recent Comparative Performance Analysis Of Real Estate Mutual Funds Vs. Common Stock Mutual Funds

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v7i8.2323 ◽

2011 ◽

Vol 7 (8) ◽

Author(s):

James L. Kuhle ◽

Rafiqul Bhuyan

Keyword(s):

Real Estate ◽

Mutual Funds ◽

Mutual Fund ◽

Font Size ◽

Comparative Performance ◽

Mutual Fund Managers ◽

Fund Managers ◽

Equity Mutual Funds ◽

Real Estate Investments ◽

Real Estate Assets

Historically, little evidence has been found to suggest that real estate investments exhibit superior returns. Further, it appears that real estate mutual fund managers do not possess the ability to consistently beat benchmark averages. However, there have been mixed results for REITs indicating they might be characterized by inefficiencies that could be exploited by informed fund managers. In this analysis, we examine whether mutual fund managers who have concentrated in real estate assets have statistically outperformed other categories of equity mutual funds as well as the S&P 500 and various NAREIT Indexes.

Download Full-text