An Empirical Investigation of the Performance of Japanese Mutual Funds: Skill or Luck?

Pılbeam, Keith; Preston, Hamish

doi:10.3390/ijfs7010006

Cited by 11 publications

(4 citation statements)

References 42 publications

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“…Therefore, the funds that make the greatest number of important errors in the past are also those that make the greatest number of important errors in the future that is not contradictory with global learning in which all funds generally have fewer important errors over time, and is based on the result associated to the coefficient for the time variable (Time t ). This result is consistent with Pilbeam and Preston (2019) who show persistence in the relative skill of mutual funds. These authors document that the lowest-performing funds in one period are still the worst-performing funds in the following period.…”

Section: Learning In the Mutual Fund Industrysupporting

confidence: 92%

You Learn When It Hurts: Evidence in the Mutual Fund Industry

Gimeno

Sarto

Vicente

2022

JRFM

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This paper aims to contribute to the lack of research on the learning process of mutual fund markets. The empirical design is focused on the ability of the Spanish equity mutual fund industry to learn from its important errors. The choice of this industry is justified by both its relevance in the European mutual fund markets and some specific characteristics, such as the concentration and the banking control of the industry, which may affect the learning process. Our main objectives are to identify important trading errors in mutual fund management by applying three independent filters based on the relative importance of each decision, and then testing the evolution of these errors both at the industry level and at the fund family level. We apply the dynamic model of generalized method of moments (GMM), and we find an overall significant decrease in the percentage of important trading errors over time, thereby providing evidence of the global learning process of the industry. In addition, we find that a large number of fund families drive this evidence. Finally, we obtain that the family size and its dependence on financial groups do not seem to play significant roles in explaining the learning process. Therefore, we conclude that fund managers have incentives to learn from their important trading errors, in order to avoid them in future decisions, due to their serious negative consequences on fund performance, regardless of the characteristics of the families to which they belong.

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Section: Learning In the Mutual Fund Industrysupporting

confidence: 92%

You Learn When It Hurts: Evidence in the Mutual Fund Industry

Gimeno

Sarto

Vicente

2022

JRFM

View full text Add to dashboard Cite

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“…The absolute superior returns are lower for multifactor models. Pilbeam and Preston (2019) studied the performance of 355 actively managed Japanese Mutual Funds between 2011 and 2016. Using Jensen's alpha measures, the authors found that the Japanese Mutual Funds underperformed the benchmark.…”

Section: Active Management Strategiesmentioning

confidence: 99%

Selectivity and Market Timing Ability of Fund Managers: Comparative Analysis of Islamic and Conventional HSBC Saudi Mutual Funds

Zouaoui

2019

IJFS

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This paper empirically compares the market timing, the stock selection and the performance persistence of Islamic and conventional HSBC Saudi mutual funds by using monthly returns from April 2011 to December 2018. The data was grouped into five portfolios based on geographical investment basis (locally, Arab, internationally) and Sharia compliance (Islamic and conventional). The empirical results indicate that Islamic funds underperformed conventional funds internationally but not locally. Findings suggest that the market selectivity skills of managers in the Islamic funds are better than the conventional funds. In addition, only the managers of Saudi conventional funds investing internationally have a good market timing skills, thus, they are able to beat the market index by predicting its movements and buying and selling accordingly. Furthermore, this study gives a brief idea about the performance persistence of HSBC Saudi funds. The results confirm existence of the persistence performance when the funds do not apply Sharia law and when they are instead focused internationally.

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“…They also discovered that the distribution of fund alphas was consistent with a mixture of skill and luck but with a greater emphasis on luck. However, Pilbeam and Preston (2019) suggested that while a small number of funds exhibit skill, most funds do not appear to possess skill, and their performance can be attributed to luck. The authors further explained that the predictability of fund performance is weak, indicating that historical performance is not a reliable predictor of future performance.…”

Section: Mutual Fund Performance and Managers' Skillsmentioning

confidence: 99%

Analyzing the Performance of Pakistan Equity Mutual Funds Using Multifactor Models: Pre-COVID Analysis

Danial,

Iftikhar,

Shah

2023

BMS

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Previous literature has primarily focused on examining the determinants that impact mutual fund returns in developed and emerging economies. However, there is a dearth of empirical research on how multifactor models are associated with mutual fund returns in underdeveloped economies. The inconsistent literature regarding the efficiency of the literature posed a question of whether the fund managers can generate extra returns for the investors. To address this research gap, this study aims to analyze mutual fund returns using multifactor models, specifically the Capital Asset Pricing Model (CAPM), Fama-French three-factor model, Carhart four-factor model, Treynor-Mazuy and Fama Net-Selectivity. The first three models analyze the funds with four factors: market factor, growth factor, value factor and momentum factor. The results of the study indicate that the risk premium factor plays a crucial role in understanding mutual fund returns, as it exhibits significant value across all three models. However, the value and size factors were found to be insignificant in both the Fama-French and Carhart models. Additionally, the momentum factor was not significant in the Carhart model. Notably, the significant alpha observed in all multifactor models suggests the skill of mutual fund managers, which was further confirmed using the Treynor-Mazuy and Fama Net-Selectivity models to assess their timing and selectivity abilities in actively managed funds. Furthermore, the finding of the study suggests the inefficiency of the market. The investors could earn extra return from their investments. However, the managers play important role in generating the abnormal returns as suggested by Treynor-Mazuy and Fama Net-selectivity model significance. In addition to that, investors should consider the market risk premium in their investment returns.

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An Empirical Investigation of the Performance of Japanese Mutual Funds: Skill or Luck?

Cited by 11 publications

References 42 publications

You Learn When It Hurts: Evidence in the Mutual Fund Industry

You Learn When It Hurts: Evidence in the Mutual Fund Industry

Selectivity and Market Timing Ability of Fund Managers: Comparative Analysis of Islamic and Conventional HSBC Saudi Mutual Funds

Analyzing the Performance of Pakistan Equity Mutual Funds Using Multifactor Models: Pre-COVID Analysis

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