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Article
Publication date: 1 October 2003

John N. Sorros

The present article aims to evaluate the performance of sixteen equity mutual funds operating in the Greek financial market over the period 1/1/1995‐31/12/1999. In doing…

2731

Abstract

The present article aims to evaluate the performance of sixteen equity mutual funds operating in the Greek financial market over the period 1/1/1995‐31/12/1999. In doing so, the sample mutual funds were ranked on the basis of their return, total risk, coefficient of variation, systematic risk, and the techniques of Treynor, and Sharpe. Four mutual funds achieved lower return than the General Index of the Athens Stock Exchange (ASE). All sixteen mutual funds showed lower total risk, and risk‐return coefficient than the General Index of the ASE. In all mutual funds the beta coefficient was statistically significant at 5 per cent level of significance. The alpha coefficient was also statistically significant at 5 per cent level of significance in eight mutual funds. The movements of the General Index of the ASE explain more than 80 per cent of the variation in return in all sixteen mutual funds. Eight mutual funds were ranked in the same order on either Treynor’s or Sharpe’s technique.

Details

Managerial Finance, vol. 29 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 October 2003

George P. Artikis

The present article aims to evaluate the performance of ten domestic balanced mutual funds operating in the Greek financial market over the period 1/1/1995‐31/12/1998. In…

1157

Abstract

The present article aims to evaluate the performance of ten domestic balanced mutual funds operating in the Greek financial market over the period 1/1/1995‐31/12/1998. In doing so, the sample mutual funds were ranked on the basis of their return, total risk, coefficient of variation, systematic risk, and the techniques of Treynor, Sharpe and Jensen. The ten mutual funds achieved lower return than the General Index of the Athens Stock Exchange (ASE). However, the mutual funds achieved satisfactory return in relation to the total and systematic risk undertaken. The sample mutual funds followed defensive investment policy that was in line with their objectives. The General Index of the ASE appeared to be a close approximation of the market portfolio. To some extent the ranking of the mutual funds varied among the techniques of Treynor, Sharpe and Jensen, although certain mutual funds were ranked in the same order regardless of the technique used. According to Jensen, seven mutual funds had superior performance, while the remaining three demonstrated poor performance.

Details

Managerial Finance, vol. 29 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 October 2004

Panayiotis G. Artikis

The present article aims to evaluate the performance of thirty‐nine domestic bond mutual funds operating in the Greek financial market over the period…

1798

Abstract

The present article aims to evaluate the performance of thirty‐nine domestic bond mutual funds operating in the Greek financial market over the period 15/3/1999‐31/12/1999. The ranking of the sample mutual funds is different between the average daily return, and the total risk. On the basis of the coefficient of variation the sample mutual funds are classified in nine categories. The performance of thirty‐three mutual funds is affected, and can be explained to a satisfactory level by the movements in the Bond Index. On the other hand, the performance of twenty‐five mutual funds is affected, and can be explained to a satisfactory level by the movements in the General Index of the ASE. The Bond Index appears to approximate the market portfolio closer than the General Index of the ASE. Twenty‐seven from the sample mutual funds show values for alpha coefficient different than zero value that is assumed by the capital asset pricing model.

Details

Managerial Finance, vol. 30 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Abstract

Details

The Savvy Investor’s Guide to Pooled Investments
Type: Book
ISBN: 978-1-78973-213-9

Article
Publication date: 9 November 2015

Javier Rodriguez

This study aims to examine the cross-sectional variation in risk of US-based micro-cap open-end mutual funds. Micro-cap mutual funds allow investors to access very…

2391

Abstract

Purpose

This study aims to examine the cross-sectional variation in risk of US-based micro-cap open-end mutual funds. Micro-cap mutual funds allow investors to access very low-priced stocks issued by the smallest of companies. The stock of these firms is usually not traded in major exchanges, and their financial information is not readily available and, thus, regarded as risky investments.

Design/methodology/approach

The author examines the cross-sectional variation in risk and higher moments of US-based micro-cap mutual funds in comparison with that of small-cap and mid-cap mutual funds. Total, systematic and idiosyncratic risk metrics, along with higher moments, are estimated before, during and after the 2008 financial crisis.

Findings

The author finds that, indeed, based on total and idiosyncratic risk metrics, the sample of micro-cap funds is riskier than the size-matched samples of small-cap and mid-cap funds. The author also reports that the sample of micro-cap funds fail to generate higher excess returns than the less risky small-cap and mid-cap funds.

Originality/value

To the best of the author’s knowledge, this is the first time that the risk of small-cap mutual funds has been examined.

Details

Review of Accounting and Finance, vol. 14 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 31 December 2007

Onur Arugaslan, Ed Edwards and Ajay Samant

This paper seeks to evaluate the risk‐adjusted performance of the largest US‐based equity mutual funds using rigorous analysis grounded in modern portfolio theory and…

1049

Abstract

Purpose

This paper seeks to evaluate the risk‐adjusted performance of the largest US‐based equity mutual funds using rigorous analysis grounded in modern portfolio theory and present the results in a manner which is comprehensible to a lay investor.

Design/methodology/approach

This study evaluates the performance of the 20 largest US‐based mutual funds using risk‐adjusted returns during 1995‐2004. In particular, a relatively new risk‐adjusted performance measure by Modigliani and Modigliani is used to evaluate these equity funds. This study also utilizes a variation of the Sortino Ratio to account for downside risk.

Findings

The results show that the funds with the highest returns may lose their attractiveness once the degree of risk had been factored into the analysis. Conversely, some funds may look very attractive once their low risk is factored into their performance.

Research limitations/implications

Future researchers may want to investigate the effects of factors, such as fund manager, compensation, service fees, corporate governance metrics, and overweighting in risky industries on the performance of mutual funds.

Practical implications

The empirical evidence presented in this study can be used as input in decision making by investors who are exploring the possibility of participating in the stock market via large mutual funds, but are not sure of what selection criteria to employ.

Originality/value

The paper is one of the first studies that apply the new M2 measure to evaluate the performance of mutual funds. Various other performance metrics are also utilized including the Sharpe, Sortino, Treynor measures and Jensen's α.

Details

International Journal of Commerce and Management, vol. 17 no. 1/2
Type: Research Article
ISSN: 1056-9219

Keywords

Article
Publication date: 22 April 2003

Ed Edwards and Ajay Samant

This study evaluates risk‐adjusted performance of socially responsible mutual funds during the period 1991‐2000, using objective statistical measures grounded in modern…

Abstract

This study evaluates risk‐adjusted performance of socially responsible mutual funds during the period 1991‐2000, using objective statistical measures grounded in modern portfolio theory. A socially responsible mutual fund is defined as one which employs “social screens” in stock selection, such as whether a fi rm manufactures tobacco products, whether it is in the gambling business, whether it heeds environmental safety, its human rights records, etc. The main objective of this study is to provide empirical documentation on the risk‐adjusted returns of these mutual funds, for the benefit of investors. To our knowledge, this is one of the first, if not the first, academic study to utilize a relatively new risk‐adjusted performance measure, posited by Nobel Laureate Franco Modigliani and Leah Modigliani in 1997 (hereafter referred to as M Squared), to evaluate socially responsible mutual funds. The idea that underlies their methodology is to adjust the investment risk of a mutual fund to the level of risk in an unmanaged benchmark stock‐market index and then measure the returns on the risk‐matched fund. The M Squared measure not only relates the level of risk to the level of reward, but also enables risk‐adjusted returns to be reported on a percentage basis, rather than on an absolute basis, which makes them more easily understood by the average investor. The results of this study can be used in decision making by investors who seek objective criteria to select a socially responsible mutual fund from among a menu of several funds.

Details

American Journal of Business, vol. 18 no. 1
Type: Research Article
ISSN: 1935-5181

Keywords

Article
Publication date: 29 April 2020

Farrukh Naveed and Syed Zain Ul Abdin

This study aims to analyze the impact of corporate governance characteristics on the risk exposure of Islamic mutual funds prevailing in different Islamic countries…

Abstract

Purpose

This study aims to analyze the impact of corporate governance characteristics on the risk exposure of Islamic mutual funds prevailing in different Islamic countries (Pakistan and Malaysia).

Design/methodology/approach

This study used dynamic panel regression model for analysis and estimated the results using system generalized method of moment technique. A sample of 185 Islamic funds is used in the current research, which is selected using judgmental sampling. The data span of this study consists nine years from 2009 to 2017.

Findings

The results showed that the corporate governance characteristics such as board independence, directors and institutional ownership and overall governance quality are helpful in reducing the total and downside risk exposure of Islamic mutual funds. The findings also suggest that board size and Chief Extractive officer duality play no role in mitigating the risk of Islamic funds prevailing in both countries.

Practical implications

This study has implication for industry practitioners and fund managers. This study showed that the corporate governance characteristics are helpful in reducing the risk exposure of Islamic mutual funds. Therefore, this study provides input to the investment firms to improve the quality of corporate governance for lowering the risk exposure of mutual funds.

Originality value

To the best of the authors’ knowledge, this study is the first attempt to analyze the impact of corporate governance characteristics on the risk exposure of Islamic mutual funds and hence provides significant contribution in the literature of mutual funds.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 9
Type: Research Article
ISSN: 1759-0817

Keywords

Open Access
Article
Publication date: 30 April 2020

Farrukh Naveed, Idrees Khawaja and Lubna Maroof

This study aims to comparatively analyze the systematic, idiosyncratic and downside risk exposure of both Islamic and conventional funds in Pakistan to see which of the…

3132

Abstract

Purpose

This study aims to comparatively analyze the systematic, idiosyncratic and downside risk exposure of both Islamic and conventional funds in Pakistan to see which of the funds has higher risk exposure.

Design/methodology/approach

The study analyzes different types of risks involved in both Islamic and conventional funds for the period from 2009 to 2016 by using different risk measures. For systematic and idiosyncratic risk single factor CAPM and multifactor models such as Fama French three factors model and Carhart four factors model are used. For downside risk analysis different measures such as downside beta, relative beta, value at risk and expected short fall are used.

Findings

The study finds that Islamic funds have lower risk exposure (including total, systematic, idiosyncratic and downside risk) compared with their conventional counterparts in most of the sample years, and hence, making them appear more attractive for investment especially for Sharīʿah-compliant investors preferring low risk preferences.

Practical implications

As this study shows, Islamic mutual funds exhibit lower risk exposure than their conventional counterparts so investors with lower risk preferences can invest in these kinds of funds. In this way, this research provides the input to the individual investors (especially Sharīʿah-compliant investors who want to avoid interest based investment) to help them with their investment decisions as they can make a more diversified portfolio by considering Islamic funds as a mean for reducing the risk exposure.

Originality/value

To the best of the author’s knowledge, this study is the first attempt at world level in looking at the comparative risk analysis of various types of the risks as follows: systematic, idiosyncratic and downside risk, for both Islamic and conventional funds, and thus, provides significant contribution in the literature of mutual funds.

Details

ISRA International Journal of Islamic Finance, vol. 12 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

Book part
Publication date: 25 February 2016

Jana Hili, Desmond Pace and Simon Grima

The uncertainty as to whether investments in riskier and less efficient markets allow managers to ‘beat the market’ remains a question to which answers are required…

Abstract

Purpose

The uncertainty as to whether investments in riskier and less efficient markets allow managers to ‘beat the market’ remains a question to which answers are required. Accordingly, the purpose of this chapter is to offer new insights on portfolios of the US, European and Emerging Market (‘EM’) domiciled equity mutual funds whose objectives are the investment in emerging economies, and specifically analyses two main issues: alpha generation and the influence of the funds’ characteristics on their risk-adjusted performance.

Methodology/approach

The dataset is made up a survivorship-bias controlled sample of 137 equity funds over the period January 2004 to December 2014, which are then grouped into equally weighted portfolios according to the scheme’s origin. The Jensen’s (1968) Single-Factor model along with the Fama and French’s (1993) and Carhart’s (1997) multifactor models are employed to authenticate results and answer both research questions.

Findings

Research analysis reveals that EM exposed fund managers fail to collectively outperform the market. It thereby offers ground to believe that the emerging world is very close to being efficient, proving that the Efficient Market Hypothesis (‘EMH’) ideal exists in this scenario where market inefficiency might only be a perception of market participants as any apparent opportunity to achieve above-average returns is speedily snapped up by very active managers. Overall these managers take a conservative approach to portfolio construction, whereby they are more unperturbed investing in large cap equity funds so as to lessen somewhat the exposure towards risks associated with liquidity, stability and volatility.

Furthermore, the findings show that large-sized equity portfolios have the lead over the medium and small-sized competitors, whilst the high cost and mature collective investment vehicles enjoy an alpha which although is negative is superior to their peers. The riskiest funds generated the lowest alpha, and thereby produced doubts as to whether investors should accept a higher risk for the hope of earning higher returns, at least when aiming to gain an exposure into the emerging world.

Originality/value

Mutual fund performance is not an innovative topic so to speak. Nonetheless, researchers and academia have centred their efforts on appraising the behaviour of fund managers domiciled primarily in developed and more efficient economics, leaving the emerging region highly uncovered in this respect. This study, therefore aims at crafting meaningful contributions to the literature as well as to the practical perspective.

Details

Contemporary Issues in Bank Financial Management
Type: Book
ISBN: 978-1-78635-000-8

Keywords

1 – 10 of over 18000