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Article
Publication date: 18 May 2010

Javier Rodríguez

The purpose of this paper is to examine the performance of a sample of socially responsible mutual funds (SRMFs) and a matched sample of conventional funds during the…

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Abstract

Purpose

The purpose of this paper is to examine the performance of a sample of socially responsible mutual funds (SRMFs) and a matched sample of conventional funds during the 1997‐2005 time period.

Design/methodology/approach

Risk‐adjusted performance is examined using several methodologies, including a measure that compares the performance of a fund with that of an efficient and volatility‐match benchmark portfolio.

Findings

On the basis of the raw returns, socially responsible funds performed better than some market indexes but this evidence of outperformance disappears once risk is incorporated into the analysis. Consistent with previous studies, no evidence was found of out performance by socially responsible funds. Also, the difference between the performance of SRMFs and conventional mutual funds is not statistically significant. This result is robust to the use of two additional measures of risk‐adjusted performance.

Originality/value

To measure risk‐adjusted performance, a measure first introduced by Graham and Harvey was employed. Similar to the Jensen's alpha of a single factor model, the Graham and Harvey measure evaluates fund performance relative to a volatility‐match benchmark but does not depend on a linear model specification and thus is free from the potential biases presented by linear models.

Details

Review of Accounting and Finance, vol. 9 no. 2
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 23 January 2007

Fikriyah Abdullah, Taufiq Hassan and Shamsher Mohamad

One of the implications of Islamic investment principles is the availability of Islamic financial instruments in the financial market. The main aim of this research is to…

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Abstract

Purpose

One of the implications of Islamic investment principles is the availability of Islamic financial instruments in the financial market. The main aim of this research is to observe the differences in terms of performance between Islamic and conventional mutual fund in the context of Malaysian capital market.

Design/methodology/approach

To achieve the major objectives of this paper standard methods wereused for evaluating the mutual funds performance, for example, Sharpe index and adjusted Sharpe index, Jensen Alpha, Timing and selectivity ability. The scope of the paper is to measure the relative quantitative performance of funds which was managed based on two different approaches.

Findings

The basic finding of the paper is that Islamic funds performed better than the conventional funds during bearish economic trends while, conventional funds showed better performance than Islamic funds during bullish economic conditions. In addition to that finding, both conventional and Islamic funds were unable to achieve at least 50 per cent market diversification levels, though conventional funds are found to have a marginally better diversification level than the Islamic funds. The results also suggest that fund managers are unable to correctly identify good bargain stocks and to forecast the price movements of the general market.

Research limitations/implications

The main limitation is that the samples of conventional and Islamic mutual funds were from one developing market. The findings could be better validated if the sample included the mutual funds from other developed and developing economies, where both Islamic and conventional funds are available.

Practical implications

The findings suggest that having Islamic mutual funds in an investment portfolio helps to hedge the downside risk in an adverse economic situation.

Originality/value

So far there is no published evidence on the relative performance of Islamic and conventional mutual funds in Malaysia as well as other developing countries. Therefore, this paper adds new knowledge to the mutual funds literature.

Details

Managerial Finance, vol. 33 no. 2
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 26 April 2022

Morten Lund Poulsen, Per Nikolaj Bukh and Karina Skovvang Christensen

This paper studies how performance funding of education is perceived by principals, teachers and administrative staff and management. The dysfunctionality of performance

Abstract

Purpose

This paper studies how performance funding of education is perceived by principals, teachers and administrative staff and management. The dysfunctionality of performance measures often reflects how the measures prevent an organisation from achieving its goals. This paper proposes that perceptions of dysfunctionality can be analysed by separating the perceptions of the programme's intentions, of the school-level actions and of the outcomes for students.

Design/methodology/approach

Following a qualitative methodology, semi-structured interviews were conducted with teachers, school management, staff specialists and top management in a large Danish municipality when outcome-based funding was introduced.

Findings

The performance-funding programme affected teaching by changing educational priorities. Different perceptions of the (dys)functionality of intentions, actions and outcomes fuelled diverging responses. Although the performance measure was generally considered incomplete, interviewees' perceptions of the financial incentivisation and the dysfunctionality of actions depended on interpretations of the incentivisation and student-related outcomes of the programme.

Research limitations/implications

Dysfunctionality can be contested; the interpretations of the intention of a performance-funding programme affect the perceived dysfunctionality of reactions. Both technical characteristics of funding schemes and administrators' and principals' mediating roles are essential for the consequences of performance funding.

Originality/value

The paper examines conditions for dysfunctionality of performance measures. We demonstrate that actions can be perceived as dysfunctional because of a measurement's intentions, actions themselves and the actions' outcomes. Further, the paper illustrates how the reception of performance funding depends on how consequences are enacted based on educators' interpretations of the (dys)functionality of intentions, actions and outcomes.

Details

Accounting, Auditing & Accountability Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 15 April 2022

XiaoXiao Han, Skander Lazrak and Samir Trabelsi

The purpose of this study is to investigate whether the organizational form of an investment management firm affects the performance of the mutual funds under its…

Abstract

Purpose

The purpose of this study is to investigate whether the organizational form of an investment management firm affects the performance of the mutual funds under its operation. More explicitly, this study aims to test whether funds managed by publicly listed firms achieve different risk-adjusted performance when compared with funds operated by privately held investment firms.

Design/methodology/approach

This study uses Jensen's alpha to measure fundsperformance based on the Carhart’s (1997) benchmarks and market timing factors. The researchers test the relation between fund performance and organizational form using regressions. It alleviates the reverse causality and endogeneity using propensity score matching (PSM) methodology. The study investigates the difference in performance of funds managed by public firms on the post- vs pre- initial public offering (IPO) basis. Alternatively, this study tests the performance change post-public listing of the parent firm. It computes the difference for a matched sample of funds managed by private firms that were likely to go public but did not. The researchers match funds using PSM methodology.

Findings

This paper provides robust evidence that publicly traded management companies administer relatively under-performing mutual funds in comparison to those managed by privately held firms. To the best of the authors’ knowledge, this is the first paper that confirms that organizational decision is endogenous to performance. The study finds that after a privately held company goes public, the performance of their mutual funds and the performance of the matched group funds, whose companies remained private at the same time, tends to decline, compared with companies prior to the public offering. However, the decline in mutual fund performance is larger for the companies who chose to pursue their IPO.

Originality/value

The contribution of this study to the literature is twofold. First, while there is a wealth of literature on the impact of ownership structures on corporate performance, there are very few studies focused on mutual fund markets, despite the evidence that supports a generally mixed effect. This study confirms that the performance of mutual funds managed by publicly traded investments firms is lower than that of funds managed by privately held firms. Second, the organizational decision (private vs public) is not exogenous but depends on the actual fundsperformance.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 27 December 2021

Faisal Khan, Syed Hamid Ali Shah and Romana Bangash

This study is about the determinants of cash holding and impact of cash holding on mutual fundsperformance. In addition, the study analyzes the impact of performance

Abstract

Purpose

This study is about the determinants of cash holding and impact of cash holding on mutual fundsperformance. In addition, the study analyzes the impact of performance-related determinants of cash holding on funds' performance.

Design/methodology/approach

Panel data of ten years of 190 open-end mutual funds are analyzed through fixed effect regression technique. The risk-adjusted funds' performance of cash based portfolios is computed through capital asset pricing model (CAPM) (1964), Fama and French (1993) and Carhart (1997) models.

Findings

The results indicate that small size funds, high charging front-end load funds, high turnover ratio funds, high 12-month fund returns run up, high dividend paying funds and high redemption level funds hold more cash for precautionary purpose to avoid costs of cash short-falls. Further, monthly average raw returns and risk-adjusted performance of funds with the lowest raw and residual cash holding are found higher than the funds with the highest cash holding. An increase in cash is found to dilute performance.

Originality/value

This is a pioneer study in a corporate environment with shallow capital market, reliance of businesses on bank credit, firms exposed to agency issues, wealth expropriations and existence of business groups with political linkages but with opportunities of investments due to expected favorable geo-socio-political situation. The study generates outcomes relevant for other similar economies.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 28 September 2021

Avinash Ghalke and Shripad Kulkarni

When 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…

Abstract

Purpose

When 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/approach

The 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.

Findings

Contrary 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/value

In 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.

Details

International Journal of Managerial Finance, vol. 18 no. 5
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 8 April 2021

Anurag Bhadur Singh and Priyanka Tandon

The present study tries to explore the various fund attributes that influence the mutual fund performance. Further, study examined the effect of mutual fund attributes…

Abstract

Purpose

The 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/approach

The 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.

Findings

The 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/implications

The 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 implications

The 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/value

There 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.

Details

Benchmarking: An International Journal, vol. 29 no. 1
Type: Research Article
ISSN: 1463-5771

Keywords

Article
Publication date: 5 March 2018

Yuhong Fan

The purpose of this study is to examine the impact of position adjusted turnover ratio on mutual fund performance.

Abstract

Purpose

The purpose of this study is to examine the impact of position adjusted turnover ratio on mutual fund performance.

Design/methodology/approach

The author calculates position adjusted turnover ratio in the same three steps as Edelen et al. (2013). Position adjusted turnover ratio is intended to be a trading cost proxy that captures both fund trading volume and per-trade costs. A metric of eight Morningstar performance measures is utilized.

Findings

Results show that funds with a higher position adjusted turnover ratio tend to have a lower risk-adjusted performance, such as indicated by both Sharpe and Sortino ratios, and even though these funds may have a higher annualized return.

Research limitations/implications

The sample selection process is subject to a survival bias. Also, this study utilizes Morningstar performance measures rather than the widely used factors models.

Practical implications

This study examines the impact of invisible costs from fund trading. These findings encourage fund managers to take strategic steps to reduce the overall invisible cost impact to improve fund performance.

Originality/value

Few studies have investigated fund trading cost measured by position adjusted turnover ratio and its impact on fund performance. Further, this study contributes to current literature by using eight Morningstar fund performance variables, which are practitioner-oriented and are accessible by investors.

Details

Studies in Economics and Finance, vol. 35 no. 1
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 8 May 2017

Sanjay Sehgal and Sonal Babbar

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

Abstract

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.

Details

Journal of Advances in Management Research, vol. 14 no. 2
Type: Research Article
ISSN: 0972-7981

Keywords

Open Access
Article
Publication date: 21 June 2019

Halil Kiymaz

The purpose of this paper is to examine socially responsible investment (SRI) fund performance and investigate the factors influencing fund performance.

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Abstract

Purpose

The purpose of this paper is to examine socially responsible investment (SRI) fund performance and investigate the factors influencing fund performance.

Design/methodology/approach

The study uses return data from the Morningstar database for 152 SRI funds from January 1995 to May 2015. The initial analysis includes the use of various risk-adjusted performance measures, including Sharpe ratio, Treynor ratio, Information ratio, Sortino ratio and M2. The study also uses four factor models, including Jensen single-factor model, Fama–French three-factor model, Carhart four-factor model and Fama–French five-factor model to explain SRI fund returns. Finally, a cross-sectional regression analysis is applied to investigate the determinants of SRI fund returns.

Findings

The results show that, on average, the SRI funds provide comparable risk-adjusted returns relative to various benchmark market indices. Market factor is significant in explaining SRI fund returns. Examining each factor model, the results do not support Fama–French’s three-factor model as neither size nor value factor is significant. The author finds weak support for Carhart’s momentum factor along with the market factor. Finally, the Fama–French five-factor model shows market, size and operating profit factors explain SRI fund returns. The study also finds the fund performance is stronger for funds with the higher turnover ratio, the larger fund size and more managerial experience and lower for funds with higher expense ratio. Also, funds formed with negative screening perform better than positive or mixed screened funds.

Originality/value

SRI funds have received considerable attention from investors. This study contributes to the literature by examining SRI fund performance and investigating factors influencing their performance using multiple factor models and cross-sectional regression analysis. The findings are relevant for investors who demand responsible investment opportunities without sacrificing returns for nonfinancial screenings. Findings also suggest that investors should consider fund characteristics when selecting SRI funds.

Details

Journal of Capital Markets Studies, vol. 3 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

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