Performance evaluation models applied to the Brazilian mutual funds market

Abstract

Purpose

This paper analyzes alternative performance evaluation models applied to equity mutual funds under conditional and unconditional approaches in the Brazilian market.

Design/methodology/approach

The analysis is conducted using CAPM's single factor, Fama–French three and five factors, under their conditional and unconditional versions in a sample of 896 equity mutual funds from 2008 to 2019.

Findings

The results suggest that the use of three- or five-factor models is especially relevant to reduce the effect of market anomalies in performance assessment. Additionally, results show that conditional approaches, adding time-varying alphas and betas with macroeconomic variables, provide higher explanatory power than their unconditional peers.

Originality/value

The results are relevant in the unique economic environment characterized by historically high interest rate and high market volatility.

Citation

Corso Kruk, D. and Coppe Pimentel, R. (2024), "Performance evaluation models applied to the Brazilian mutual funds market", International Journal of Emerging Markets, Vol. 19 No. 8, pp. 2134-2151. https://doi.org/10.1108/IJOEM-01-2021-0153