Managerial Abilities: Evidence from Religious Mutual Fund Managers

Abstract

In this study, we analyze the financial performance and the managerial abilities of religious mutual fund managers, implementing a comparative analysis with conventional mutual funds. We use a broad sample, free of survivorship bias, of religious equity mutual funds from the US market, for the period from January 1994 to September 2010. We build a matched-pair conventional sample in order to compare the results obtained for both kinds of mutual fund managers. We analyze stock-picking and market timing abilities, topics widely neglected for the specific case of religious mutual fund managers. We also study style timing abilities. As far as we are aware, this aspect has not been studied previously for religious mutual fund managers. Our results indicate that religious mutual fund managers underperform both the market and their conventional counterparts. This result is driven by negative stock-picking ability which could be generated by excluding ''Sin'' stocks from their portfolios. Moreover, they are not able to time the market or any of the following styles: size, book-to-market, and momentum.

The abilities of managers in UK pension funds. Are socially responsible managers superior?

“…In relation to the investment styles, conventional and SR pension funds usually invest in small caps (significantly positive β 2 ) and growth stocks (significantly negative β 3 ). Similar results are found by Ferruz et al (2012) in a US mutual fund sample, in which religious mutual funds usually invest in small caps. Moreover, both pension funds develop contrarian momentum strategies (significantly negative β 4 ).…”

“…Some of the most recent papers about financial performance of SR mutual funds have implemented this methodology (Bauer et al 2005;Bauer et al 2006;Bauer et al 2007;Kempf and Osthoff 2007;Climent and Soriano 2011;Ferruz et al 2012):…”

Stock Picking and Market Timing of the Egyptian Fund Managers: Evidence from the Financial Crisis

“…However, these proxies of comparable returns are attributed to the similar level of market risk they both expose across the total period. This result differs from that of Luis et al, (2012) who add that religious mutual fund managers underperform their conventional counterparts.…”

Performance of European socially responsible funds during market crises: Evidence from France

“…Although the issue of market timing abilities of mutual fund managers has been extensively explored in the finance literature, there are only a few studies that address managers' timing abilities with respect to their investment styles or market segments (e.g., Chan, Chen, & Lakonishok, 2002;Daniel, Grinblatt, Titman, & Wermers, 1997;Glassman & Riddick, 2006). In the SRI context, this evidence is scarce and, to the best of our knowledge, limited to the studies of Ferruz, Muñoz, and Vargas (2012) and Muñoz, Vicente, and Ferruz (2015) on US funds and Muñoz et al (2014) on green mutual funds. Ferruz et al (2012) show that religious mutual funds underperform conventional funds not only in terms of their stock-picking abilities, but also because they cannot time any investment style, unlike their conventional peers, which show positive ability to time the size and book-to-market styles.…”

“…In the SRI context, this evidence is scarce and, to the best of our knowledge, limited to the studies of Ferruz, Muñoz, and Vargas (2012) and Muñoz, Vicente, and Ferruz (2015) on US funds and Muñoz et al (2014) on green mutual funds. Ferruz et al (2012) show that religious mutual funds underperform conventional funds not only in terms of their stock-picking abilities, but also because they cannot time any investment style, unlike their conventional peers, which show positive ability to time the size and book-to-market styles. In turn, Muñoz et al (2015) find little differences between US SRI and conventional mutual fund managers, with both groups exhibiting negative selectivity abilities, positive size and bookto-market timing skills and an inability to time the market or the momentum factor.…”