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1 – 10 of 90This study investigates the performance distribution of passive funds in the Korean market and compares it with the performance distribution of active funds. The key findings are…
Abstract
This study investigates the performance distribution of passive funds in the Korean market and compares it with the performance distribution of active funds. The key findings are as follows, first, the performance distribution of passive funds has a thicker tail compared to that of active funds. There are passive funds that achieve outstanding performance, and both the false discovery rate (FDR) analysis and simulation analysis suggest that their outperformance is driven by managerial skill rather than luck. Second, passive fund performance is more persistent compared to active fund performance. Third, investors are less responsive to passive fund performance compared to active fund performance. The fund flow-performance relationship is significantly positive for active funds but not for passive funds. This implies that investors may not recognize the managerial skills of passive funds.
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This paper seeks to explore the effect of performance duration (rather than intensity) on the subsequent initiation of strategic change by firms. Specifically, the effect of…
Abstract
Purpose
This paper seeks to explore the effect of performance duration (rather than intensity) on the subsequent initiation of strategic change by firms. Specifically, the effect of outperformance and underperformance duration on strategic change, as well as the moderating effect of environmental dynamism, is studied.
Design/methodology/approach
Using a fixed-effects model, analyzing a sample of 34,907 firm-year observations from 1980 to 2018 across 112 industries mostly supported proposed hypotheses.
Findings
Results revealed a U-shaped relationship between outperformance duration and strategic change and an inverted U-shaped relationship between underperformance duration and strategic change. The moderation role of environmental dynamism was only partially supported.
Originality/value
This study examines a new dimension of performance feedback, namely duration, rather than the widely used intensity of performance feedback, to enhance our understanding of the behavioral theory of the firm.
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The purpose of this study is to measure mutual funds' manager performance by attributing it to their abilities to choose better securities (selectivity effect) and to allocate…
Abstract
Purpose
The purpose of this study is to measure mutual funds' manager performance by attributing it to their abilities to choose better securities (selectivity effect) and to allocate these securities better than their benchmarks (allocation effect). The study enables the authors to examine the relative contributions of the commonly known asset-pricing factors in mutual funds' performance.
Design/methodology/approach
To examine managers' ability to steer funds' returns, the authors conduct a two-dimensional holdings-based analysis using factor-specific decomposition of funds' excess returns into their ability to select and allocate securities better than their benchmarks. Subsequently, the authors conduct an analysis of the covariance (ANCOVA) due to these factors in explaining funds' excess returns over time.
Findings
While managers' ability to choose better securities than the benchmarks (the selectivity effect) appears modest, some funds (especially the winners) allocate securities in their portfolios better than their benchmarks (the allocation effect) based on their exposures to certain factors (e.g. the momentum factor for the winner funds). However, although funds consistently gain through their ability to predict the size and value factors well, they do not consistently possess the skills to predict the momentum factor.
Research limitations/implications
Although the paper analyzes all the available diversified funds, the sample excludes several other categories, such as thematic and international funds. Further, the analysis is based on equity-oriented Indian funds. Broader studies of changes in factor exposures and the inclusion of more factors apart from those conventionally used may shed more light on the managers' ability to maneuver these factors.
Practical implications
The results show that mutual fund managers lack persistence in their performance, even though some of them could predict specific factors well. Since the activity in active mutual funds could not lead to superior performance over time, investors could be better off by selecting cheaper passive funds for their long-term investments.
Originality/value
The paper presents a novel approach to studying funds' performance by conducting a two-dimensional holdings-based analysis to capture the relative contributions of common asset-pricing factors in the cross-section as well as over time.
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Markus Eckey and Sebastian Memmel
The COVID-19 pandemic has hit different industries and firms with widely differing degrees of severity. The authors investigate whether ownership structure (family vs non-family…
Abstract
Purpose
The COVID-19 pandemic has hit different industries and firms with widely differing degrees of severity. The authors investigate whether ownership structure (family vs non-family) might represent a differentiating factor. The article's purpose is to conduct an initial, descriptive analysis of the impact of COVID-19 on different stock and operating performance measures of listed German companies.
Design/methodology/approach
The authors use a sample of 299 listed companies in Germany and gathered operating as well as stock market performance data following the outbreak of COVID-19. For the purpose of this paper, the authors solely focus on static and descriptive observations thus far. The intention of this paper is to describe potential implications for more differentiated, especially multivariate causal research, on family businesses in a post-COVID world.
Findings
The results indicate that, over the last five years, stock returns of family businesses have been higher than those of non-family firms. This effect seems to have been more pronounced during the first month following the COVID-19 outbreak. When applying operating measures, the outperformance becomes even more evident. The findings therefore seem to support the hypothesis proffered in the literature that family involvement enhances the potential for resilience in such firms.
Originality/value
Scholars on COVID-19 crisis performance have begun to explore firm-level factors related to financial and organizational factors, industry characteristics and country-level factors. The research extends this line of inquiry by probing the importance of family involvement in ownership.
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Timo Paumen, David P. Kroon and Svetlana N. Khapova
While Merger & Acquisition (M&A) activity has reached unprecedented levels over recent years, M&A failure rates remain high. Yet, there is growing evidence that private equity…
Abstract
While Merger & Acquisition (M&A) activity has reached unprecedented levels over recent years, M&A failure rates remain high. Yet, there is growing evidence that private equity funds show high success rates. As little is known about the differences between different types of buyers, and only scant information exists on private equity funds’ operations, we inductively explore the reasons for their outperformance. In this qualitative study, we identify three characteristics (i.e., organizational set-up, private equity investors’ professional identities, and an integrative work approach), which we brought together into a theoretical framework that explains how private equity professionals can enable better M&A performance. Finally, our findings underline the effectiveness of specific incentivization approaches applied in private equity funds.
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Thabo J. Gopane, Noel T. Moyo and Lesego F. Setaka
Stirred by scant regard for market phases in portfolio performance assessments, the current paper investigates the active versus passive investment strategies under the bull and…
Abstract
Purpose
Stirred by scant regard for market phases in portfolio performance assessments, the current paper investigates the active versus passive investment strategies under the bull and bear market conditions in emerging markets focusing on South Africa as a case study.
Design/methodology/approach
Methodologically, the measures of Jensen's alpha and Treynor index are applied to the monthly returns of 20 funds from January 2010 to June 2022.
Findings
The results are enlightening; though they contradict developed market evidence, they are consistent with emerging market trends. The findings show that actively managed funds outperform the market benchmark and passive investing style under bear and normal market conditions. Passive investment strategy outperforms both market benchmark and actively investing style under bull market conditions.
Practical implications
In the face of improved market efficiency, increased liquidity and recent technological impact, the findings of this study have practical application. The study outcomes should inform and update global investors, especially asset managers interested in emerging markets; however, the limitations of the study should also be considered.
Originality/value
While limited studies consider market conditions when comparing and contrasting the performance of passive versus active investing, such consideration is lacking in emerging markets. The current study corrects this literature imbalance.
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Daniel Page, Yudhvir Seetharam and Christo Auret
This study investigates whether the skilled minority of active equity managers in emerging markets can be identified using a machine learning (ML) framework that incorporates a…
Abstract
Purpose
This study investigates whether the skilled minority of active equity managers in emerging markets can be identified using a machine learning (ML) framework that incorporates a large set of performance characteristics.
Design/methodology/approach
The study uses a cross-section of South African active equity managers from January 2002 to December 2021. The performance characteristics are analysed using ML models, with a particular focus on gradient boosters, and naïve selection techniques such as momentum and style alpha. The out-of-sample nominal, excess and risk-adjusted returns are evaluated, and precision tests are conducted to assess the accuracy of the performance predictions.
Findings
A minority of active managers exhibit skill that results in generating alpha, even after accounting for fees, and show that ML models, particularly gradient boosters, are superior at identifying non-linearities. LightGBM (LG) achieves the highest out-of-sample nominal, excess and risk-adjusted return and proves to be the most accurate predictor of performance in precision tests. Naïve selection techniques, such as momentum and style alpha, outperform most ML models in forecasting emerging market active manager performance.
Originality/value
The authors contribute to the literature by demonstrating that a ML approach that incorporates a large set of performance characteristics can be used to identify skilled active equity managers in emerging markets. The findings suggest that both ML models and naïve selection techniques can be used to predict performance, but the former is more accurate in predicting ex ante performance. This study has practical implications for investment practitioners and academics interested in active asset manager performance in emerging markets.
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This paper aims to review, systematize and map the extant literature on private equity (PE) and study the underlying research agenda for investment selection and value creation in…
Abstract
Purpose
This paper aims to review, systematize and map the extant literature on private equity (PE) and study the underlying research agenda for investment selection and value creation in portfolio firms of PE investors. The PE investment process entails the preinvestment stage, where PE investors screen the target firms, and the postinvestment stage, where PE investors monitor the funded firms. With the motive to understand both stages, this review consolidates the findings of existing literature.
Design/methodology/approach
This research adopts a systematic literature review approach to study the underlying themes in PE investment literature. To adequately profile the key research areas, the authors have adopted citation classics in addition to keyword search and drawn the most significant papers in this field of research based on citation metrics.
Findings
The review presents a heterogeneous set of themes by encapsulating the relevant PE literature and identifies significant and emergent themes within the broad research area of investment and performance. The foundational themes found are selection determinants for PE investments, value creation in PE investments and selection vs value-adding effect of PE investors. While the emergent themes are the relative performance of PE investments; sources of value creation; skill, luck and social capital in PE; and resource dependency vis-à-vis PE. Each theme or subtheme chalks out the underlying research agendas for future researchers.
Originality/value
To build an understanding of the selection determinants and value creation, this review addresses the need to synthesize and align the PE literature concerning pre and post investment stages. PE is a fertile research area that is systematically captured in this review by identifying themes, subthemes and avenues for future research.
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Ezra Kassa Hailemariam, Leule Mebratie Hailemariam, Ermias Adane Amede and Denamo Addissie Nuramo
Bamboo is still a traditional material that requires additional development before it can be considered as a modern and reliable alternative to steel, wood, and concrete. When…
Abstract
Purpose
Bamboo is still a traditional material that requires additional development before it can be considered as a modern and reliable alternative to steel, wood, and concrete. When compared to the huge volumes of information available on timber and concrete, bamboo has a little quantity of information. When it comes to estimating bamboo structures, there are not many options. As a result, pinpointing the key qualities and events that aid or impede bamboo's integration into the construction sector is vital.
Design/methodology/approach
Factor analysis (FA) was used for summarizing and reducing data to significant ones in identifying barriers, benefits and potentials of using bamboo materials for construction. In this method, small number of factors was aimed at to explain most of the variances observed in a much larger number of variables. The goal was to identify not-directly-observable barriers and opportunities based on a larger set of observable or measurable indicators identified from literature. It attempted to identify underlying challenges and potentials that lay the patterns of bamboo material usage in the construction sector.
Findings
From the results of FA, six specific components with loadings greater than 0.5 were kept for both the barrier and the advantages of using bamboo Lack of awareness on bamboo material, Unorganized supply chain, Exclusion from standards, Outperformance of industrial products, Lack of innovation and institutional support and Bamboo's mechanistic limitation was considered to be the root causes of all barriers. On the other end, structural suitability of bamboo, viable timber alternative, meeting sustainability's demand, attractive economic model, cost effective material, positive social implications were labeled as benefits of bamboo. Finally, major recommendation regarding research, facility, institutionalizing and resource management were forwarded.
Originality/value
Ethiopia is a major bamboo producer in Africa. The bamboo sector, on the other hand, remains a part of the undeveloped and informal rural economy, preventing it from reaching its full potential. Despite technological advancements, bamboo is not commonly used in construction. As a result, using bamboo as a building material is frowned upon. In order to take effective action to accommodate bamboo as an alternative building material, significant challenges, benefits, and potential of the material must be stated with this purpose in mind.
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Kirti Sood, Kumar Arijit, Prachi Pathak and H.C. Purohit
This paper aims to empirically examine the performance of the high-ESG (environment, social and governance) portfolio vis-à-vis the low-ESG portfolio at the Indian stock market…
Abstract
Purpose
This paper aims to empirically examine the performance of the high-ESG (environment, social and governance) portfolio vis-à-vis the low-ESG portfolio at the Indian stock market before and during the Covid19 pandemic.
Design/methodology/approach
The absolute rate of return and several risk-adjusted performance measures, for instance, Sharpe ratio, Modigliani–Modigliani measure, Treynor ratio, Jensen’s alpha, information ratio, Fama’s decomposition measure and Fama and French’s three-factor model, have been used in this study along with the t-test.
Findings
All three indices (CARBONEX, GREENEX and BSE 500) had better returns during Covid19 period as compared to the pre-Covid19 period. However, these returns were not statistically significant. During Covid19, the risk of the indices also rose, but they provided better returns for the additional risk taken. Finally, it is concluded that the performance of high-ESG and low-ESG stock portfolios did not differ significantly in both periods.
Practical implications
The study is relevant to individual and institutional investors, financial advisors, portfolio managers, corporations, policymakers, market regulators and society at large.
Social implications
This study emphasized the need to expand the role of ESG investment in India for the benefit of people, communities and society as a whole.
Originality/value
This research is the first of its kind, to the best of the authors’ knowledge, that compares the performance of a high-ESG portfolio with a low-ESG portfolio both before and during the Covid19, particularly in the Indian context.
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