Adjusting for risk factors in mutual fund performance and performance persistence

Abstract

Purpose The purpose of this paper is to examine the performance of Greek equity mutual funds and the persistence in annual performance for the period 2008-2017 by using a variety of performance models. Design/methodology/approach Using all the available funds in operation and daily data, the authors apply single-index (Jensen, 1968) and multi-factor models (Fama and French, 1993; Carhart, 1997) to measure risk-adjusted returns. To assess performance persistence, a series of parametric (Bollen and Busse, 2005) and nonparametric tests (Malkiel, 1995; Brown and Goetzmann, 1995; Kahn and Rudd, 1995) is implemented. Findings Results show that the Greek equity mutual funds perform, on average, worse than the market index, irrespective of the performance measure applied, and the estimations obtained by the models are similar. Few managers that followed large-cap strategies, pursued stocks with high book-to-market value ratio and eliminated their exposure to the momentum effect were able to add value to their portfolios. Furthermore, a winner-picking strategy based on sustained superior performers is questioned. However, assigning fund returns to the corresponding risk factors results in the partial disappearance of persistence in performance. Originality/value The sample period includes the turbulent period, following the introduction of capital controls, which affected capital flows significantly. Moreover, the application of multiple performance measures enables us to investigate performance persistence in a wider spectrum.

The static and dynamic connectedness of environmental, social, and governance investments: International evidence

“…According to the European Sustainable Investment Fund (EUROSIF), the last two decades show clear signs of SRI becoming integral to European fund management, while ESG integration, which remains by far the preferred strategy, has grown by 60%. In addition, ESG equity mutual funds have attracted record net flows in recent years ( Koutsokostas and Papathanasiou, 2017 ; Koutsokostas et al., 2019 ). Europe accounts for the largest concentration of ESG assets worldwide, totaling $14.1 trillion in 2018, followed by the US with $12 trillion; the latter increased by 38% from 2016.…”

Performance risk analysis on mutual funds versus stock exchanges in young financial markets

“…These come to complete the literature that states that equity funds as high risk funds usually have leptokurtik distributions (kurtosis coefficients higher than 3) (Jondeau et al, 2000;De Richard et al, 2015) and that the equity returns especially have negative asymmetries (Jondeau et al, 2000, p. 14). These findings are amplified by the period of study characterized also by economic turmoil, being well known the fact that crisis periods multiply the investment risks (Koutsokostas et al, 2019;Salganik-Shoshan, 2017).…”

“…The fact that the performances of the equity funds are the closest to the stock exchange indexes is normal, given that these funds contain a large proportion of shares traded at the stock exchange. In all countries the spread of the mean returns was the largest for equity funds, illustrating once more that the highest risks are associated with this fund category (Koutsokostas et al, 2019) among all funds categories.…”

Diagnosis and Prediction of IIGPS’ Countries Bubble Crashes during BREXIT

“…In this study, we adopt the LPPL methodology to detect the positive and negative bubbles in the IIGPS countries (Italy, Ireland, Greece, Portugal, and Spain) using the daily data of five stock indices (Irish Stock Exchange, Italian FTSE MIB Index, Athens Stock Exchange, Portuguese Stock Index, and Madrid Stock Exchange). IIGPS countries are usually referred to as PIIGS or GIPSI [27][28][29][30][31][32]. Since the above acronyms are derogatory, we herein use IIGPS as a new acronym for the five financially troubled economies of the Eurozone and cover the time period from 19 January 2015 to 17 February 2020, when the Brexit referendum occurred, in order to identify LPPL traces.…”