Persistent Performance of Fund Managers: An analysis of selection and timing skills

Pandow, Bilal (2017): Persistent Performance of Fund Managers: An analysis of selection and timing skills. Published in: International Journal of Commerce and Finance , Vol. 3, No. 2 (25 November 2017): pp. 11-24.

Abstract

The persistence in manager’s ability to select stocks and to time risk factors is a vital issue for accessing the performance of any asset management company. The fund manager who comes out successful today, whether the same will be able to sustain the performance in the future is a matter of concern to the investors and other stakeholders. More than the stock picking ability of fund managers, one would be interested in knowing whether there is consistency in selectivity and timing performance or not. If a fund manager is able to deliver better performance consistently i.e. quarter-after-quarter or year-after-year, then the managers’ performance in selecting the right type of stocks for the portfolio would be considered satisfactory. This paper has attempted to analyze the persistence in both stock selection and timing performance of mutual fund managers in India through Henriksson & Morton; Jenson, and Fama’s model over a period of five years. It is found that the fund managers present persistence in selection skills, however, the sample funds haven’t shown progressive timing skills in the Indian context.

• Item Type: MPRA Paper
• Language: English
• Keywords: Persistence, selectivity, timing, performance, mutual funds, economy
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services

References

Abdel-Kader, M., & Qing, K. Y. (2007). Risk-adjusted performance, selectivity, timing ability, and performance persistence of Hong Kong mutual funds. Journal of Asia-Pacific Business, 8(2), 25-58.

Benjamini, Y., & Hochberg, Y. (1995). Controlling the false discovery rate: a practical and powerful approach to multiple testing. Journal of the royal statistical society. Series B (Methodological), 289-300.

Benjamini, Y., & Yekutieli, D. (2001). The control of the false discovery rate in multiple testing under dependency. Annals of statistics, 1165-1188.

Berk, J. B., & Green, R. C. (2004). Mutual fund flows and performance in rational markets. Journal of political economy, 112(6), 1269-1295.

Bollen, N. P., & Busse, J. A. (2001). On the timing ability of mutual fund managers. The Journal of Finance, 56(3), 1075-1094.

Bollen, N. P., & Busse, J. A. (2005). Short-term persistence in mutual fund performance. Review of Financial Studies, 18(2), 569-597.

Brown, S. J., & Goetzmann, W. N. (1995). Performance persistence. The Journal of finance, 50(2), 679-698.

Carhart, M. M. (1997). On persistence in mutual fund performance. The Journal of finance, 52(1), 57-82.

Chance, D. M., & Hemler, M. L. (2001). The performance of professional market timers: daily evidence from executed strategies. Journal of Financial Economics, 62(2), 377-411.

Christensen, M. (2005). Danish mutual fund performance-selectivity, market timing and persistence.

Chung, C. Y., Ryu, D., Wang, K., & Zykaj, B. B. (2017). Optionable Stocks and Mutual Fund Performance. Journal of Futures Markets.

Daniel, K., Grinblatt, M., Titman, S., & Wermers, R. (1997). Measuring mutual fund performance with characteristic‐based benchmarks. The Journal of finance, 52(3), 1035-1058.

Elton, E. J., Gruber, M. J., & Blake, C. R. (1995). The persistence of risk-adjusted mutual fund performance. Fama, E. F. (1972). Components of investment performance. The Journal of finance, 27(3), 551-567.

Goetzmann, W. N., & Ibbotson, R. G. (1994). Do winners repeat?. The Journal of Portfolio Management, 20(2), 9-18.

Hendricks, D., Patel, J., & Zeckhauser, R. (1993). Hot hands in mutual funds: Short‐run persistence of relative performance, 1974–1988. The Journal of finance, 48(1), 93-130.

Henriksson, R. D. (1984). Market timing and mutual fund performance: An empirical investigation. Journal of business, 73-96.

Henriksson, R. D., & Merton, R. C. (1981). On market timing and investment performance. II. Statistical procedures for evaluating forecasting skills. Journal of business, 513-533.

Jensen, M. C. (1968). The performance of mutual funds in the period 1945–1964. The Journal of finance, 23(2), 389-416.

Pandow, B. (2016). Market Timing Ability of Fund Managers in India: An Analysis. Journal of Accounting, Finance and Auditing Studies 2(4), 172-194.

Pandow, B. (2016). Selection Abilities of Select Indian Mutual Fund Managers. Global Journal of Management And Business Research, 16(8).

Pandow, B. A., & Butt, K. A. B. (2017). Risk and Return Analysis of Mutual Fund Industry in India. International Research Dynamics of Economics, 1(1), 8-19.

Rao, Z. U. R., Tauni, M. Z., & Iqbal, A. (2017). Emerging market mutual fund performance: Evidence for China. Journal of Asia Business Studies, 11(2).

Sharpe, W. F. (1966). Mutual fund performance. The Journal of business, 39(1), 119-138.

Storey, J. D. (2002). A direct approach to false discovery rates. Journal of the Royal Statistical Society: Series B (Statistical Methodology), 64(3), 479-498.

Tonks, I. (2005). Performance persistence of pension‐fund managers. The Journal of Business, 78(5), 1917-1942.

Vidal-García, J., Vidal, M., Boubaker, S., & Uddin, G. S. (2016). The short-term persistence of international mutual fund performance. Economic Modelling, 52, 926-938.