Luck versus skill over time: time-varying performance in the cross-section of mutual fund returns

Pouliot, William; Ercolani, Joanne S.

doi:10.1080/00036846.2018.1436154

Cited by 4 publications

(5 citation statements)

References 30 publications

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“…This suggests that any outperformance was largely luck-based rather than indicative of the average manager's investment approach. Allowing for parameter estimates to adjust over time would ensure this statement could be made with more certainty, especially in light of the differences uncovered in US mutual funds by Ercolani et al (2018) compared to Fama and French (2010). The frequency of the data may be cause for concern in the market timing tests; monthly data will fail to capture managers updating their market exposure more regular than once a month.…”

Section: Discussionmentioning

confidence: 99%

“…Additionally, any effects of time variation of parameter estimates are lost by randomly sampling months. Ercolani et al (2018) have implemented the bootstrapping methodology whilst allowing for time varying parameters. It is left to future research to extend their analysis of US mutual funds to Japanese Mutual Funds.…”

Section: The Fama and French (2010) Bootstrapmentioning

confidence: 99%

“…A further development has been to allow parameter estimates to change over time; by incorporating such changes in the Fama and French (2010) bootstrap methodology. Ercolani et al (2018) find substantial evidence of time variation in US mutual funds' parameter estimates and their results reveal little evidence of performance differing from the benchmark.…”

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confidence: 91%

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

Pılbeam

Preston²

2019

IJFS

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This paper assesses the performance of 355 actively managed Japanese Equity Mutual Funds between April 2011 and April 2016. The equal weight portfolio and Jensen’s alpha measures of active management provide strong evidence that Japanese Mutual Funds fail to outperform the benchmark four-factor capital asset pricing model. When it comes to market timing, the Treynor and Mazuy measure shows that 33 funds have significant positive market timing ability which is largely offset by 31 funds with significant negative timing ability. To ensure the statistical inference is robust to the non-normality found in 33 funds we employ Fama and French’s cross-sectional bootstrap. The results show that a large proportion of funds fail to outperform a hypothetical world with no skill. On the persistence of skill we find that there is stronger persistence for poor performing funds than for strong performing funds.

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Section: Discussionmentioning

confidence: 99%

Section: The Fama and French (2010) Bootstrapmentioning

confidence: 99%

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

Pılbeam

Preston²

2019

IJFS

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“…Mutual funds currently operate in a financial industry characterized by innovative investment products and services. The mutual funds industry has moved from offering single investment opportunity to offering broad investment schemes (Ercolani et al, 2018;Otero & Reboredo, 2018). The industry is responding very rapidly to development of the financial market infrastructure worldwide (Beck et al, 2012;Cooper & Gregory-Allen, 2017).…”

Section: Introductionmentioning

confidence: 99%

Does financial innovation improve performance: Case study of Turkey

Azimova

McMillan

2021

Cogent Economics & Finance

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The mutual funds' performance over time can be driven by a number of dynamic determinants including financial innovation. In fact, financial innovation can be considered as a key factor for improving the performance and increasing the profitability of mutual funds. The purpose of this study is to examine the process of financial innovation in Turkey and its role in accelerating the development and improvement of the performance of the mutual funds industry. This study provides a framework to analyze and evaluate the developments in financial practices over the eight-year period from 2011 to 2018. The process of financial innovation is defined as new financial products and services. Based on panel analysis it is observed that the activity of mutual funds responded to a great extent to innovative market forces.

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“…According to General Statistics Office of Vietnam (2018), average income in Vietnam has increased steadily from $2,150 in 2015 to $2,385 in 2017, and is expected to continuously rise during the next period, thanks to several free trade agreements such as ASEAN Free Trade Area, Vietnam -European Union (EU) and the Industrial Revolution 4.0. However, it is inevitable that the mutual fund industry around the world will face several disadvantages due to global economy uncertainty such as the trade war between the USA and China, which will have remarkably negative impact on global economic development in general, and Vietnamese mutual funds in particular (Champagne et al, 2018;Ercolani et al, 2018;Parida and Teo, 2018). Otero and Reboredo (2018) emphasized that the Vietnamese trade balance will reduce by 20 percent because Chinese products contribute more than 60 percent of the trade volume in Vietnam, which will lead to a financial crisis if the Government does not make appropriate adjustments.…”

Section: Introductionmentioning

confidence: 99%

The impact of country-level and fund-level factors on mutual fund performance in Vietnam

Nguyen¹,

Nguyen

2019

JED

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Purpose The purpose of this paper is to examine the determinants of mutual funds’ performance at both a country level and a fund level in Vietnam. Design/methodology/approach The different types of funds with more than three-year operation are selected to remove outliers of the stock market boom from 2015 to 2018. The data set includes 54 mutual funds operating during the period from 2008 until November 2018. Findings The research finds that there is a positive relationship between macroeconomics and mutual funds’ performance. Furthermore, country-level governance such as regulation effectiveness, political stability, economic growth and financial development has a positive correlation with mutual funds’ performance. However, the impact of fund-level factors is diverse with the no significant impact of board size on mutual fund’s performance, while passive funds perform better than active funds in Vietnam. Practical implications The research results suggest that investors should pay attention to the types of funds and operating expense when making an investment decision in mutual funds. There are some recommendations for both government policy-makers and the mutual fund industry that are likely to facilitate the development of this field in Vietnam. Originality/value The research contributes to the understanding of what are the factors that should be considered when investing in mutual funds.

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Luck versus skill over time: time-varying performance in the cross-section of mutual fund returns

Abstract: Luck versus skill over time: time-varying performance in the cross-section of mutual fund returns.

Cited by 4 publications

References 30 publications

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

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

Does financial innovation improve performance: Case study of Turkey

The impact of country-level and fund-level factors on mutual fund performance in Vietnam

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