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Aggregate performance evaluation of US Equity Mutual Funds - Explaining the performance of Growth Funds vs. Value Funds.

Anjum, Sohail and Qayyum, Unbreen and Qureshi, Madeeha Gohar (2019): Aggregate performance evaluation of US Equity Mutual Funds - Explaining the performance of Growth Funds vs. Value Funds.

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Abstract

This study primarily investigates the risk-adjusted performance of US equity mutual funds by using funds provided by the Morningstar database. Funds under investigation are taken from two broad investment style categories of growth and value funds. Additionally, this study also investigates the timing & selectivity of fund managers and performance persistence. The basic finding is that the risk-adjusted performance of funds on Jensen alpha is robust along with the Sharpe ratio. Growth funds performed poorly on the net selectivity of Fama’s decomposition and M2. The leverage factor for growth funds is also below 1 for most of the funds. Value funds performed better on M2 and leverage factor due to their lowest standard deviation. Furthermore, timing ability is insignificant for most of the funds; however, there are few funds with significant alpha intercept. Performance persistence found is limited to funds lag benchmark, also most of the funds show performance reversal.

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