International Journal of Financial Management

Subrata Roy ¹, Shantanu Kumar Ghosh ²

Affiliations
1 Department of Commerce, Rabindra Mahavidyalaya, Champadanga, Hooghly, West Bengal, IN
2 Department of Commerce, The University of Burdwan, Golapbag Campus, Burdwan, West Bengal, IN

Abstract

The present study seeks to examine the markettiming performance of the open-ended income and growth mutual fund schemes' managers in India over the period from January 2001 to December 2011. The data for the proposed study are obtained from the website of Association of Mutual Funds in India (AMFI). Here, Treynor and Mazuy model is used. However, the empirical findings bring out that the market-timing performances of both types of schemes are not statistically significant. It is also observed from the analysis that eight schemes are statistically significant. Consequently, the average market-timing performance is also unsatisfactory for the income (0.007) as well as growth (-0.095) schemes. But, the mean test reveals that they are approximately equal performers. On the whole, owing to the insignificant market-timing performance, the fund managers of both types of schemes have failed to earn abnormal rate of return by applying the strategy of market outguessing from the volatile capital market. This speaks against the superior market-timing ability of the open-ended mutual fund managers in India.

Keywords

Mutual Fund, Performance Evaluation, Market-timing, Treynor and Mazuy Model, BSE Sensex

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Subrata Roy ¹, Shantanu Kumar Ghosh ²

Affiliations
1 Assistant Professor in commerce, Rabindra Mahavidyalaya, Champadanga, Hooghly, West Bengal, IN
2 Professor in Commerce, Department of Commerce, The University of Burdwan, Golapbag Campus, Burdwan, West Bengal, IN

Abstract

This study has sought to examine the comparative performance of the open-ended gilt schemes of three types of companies which have been separated according to their ownership styles (Public sector, Indian private sector&foreign private sector). This study is related with financial recession that had been occurred in the year of 2008-2009 (January 2008 to February 2009). In this study the month end net asset values of the open-ended gilt mutual fund schemes have been taken into account and the data have been obtained from the website of Association of Mutual Funds in India (AMFI). This paper has examined the risk-adjusted performance, selectivity performance, diversification performance and market-timing performance of the open-ended gilt mutual fund schemes in the period of recession. In this study, Sharpe and Treynor measures have been applied to measure the risk-adjusted performance and along with these, different coefficients have been estimated to examine the selectivity, market-timing and diversification performances of the open-ended gilt schemes offered by Indian public&private sector mutual fund companies as well as the firms belonging to foreign private sector. It has been observed that the performance of the open-ended gilt schemes of different types of companies is not satisfactory during the recession period. However, the returns of all but one of the selected open-ended gilt schemes are seen to have been positive. However, the observed positive performances of the selected schemes are not statistically significant.

Keywords

Mutual Fund, Performance, Recession, Sharpe Model, Treynor Model

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Subrata Roy ¹, Shantanu Kumar Ghosh ²

Affiliations
1 Assistant Professor , Commerce, Rabindra Mahavidyalaya, Hooghly, West Bengal, IN
2 Professor, Department of Commerce, University of Burdwan, West Bengal, IN

Abstract

The study attempts to construct the optimum mutual fund portfolios by the open-ended mutual fund schemes (income&growth). The study also examines whether the newly constructed portfolios are able to reduce diversifiable risk and which type of mutual fund schemes is better. For the achievement of these objectives, monthly closing net asset values of the open-ended income and growth schemes have been considered and the data have been obtained from the website of Association of Mutual Funds in India (AMFI). Similarly, the yields of 7 years Gov. dated securities have been taken into account as the proxy of risk free rate and finally, the monthly index values of Bombay Sensitive index have been considered as market surrogate for this study. The study period has been considered from 2001 to 2010. It has been observed from the study that the diversifiable risk (unsystematic risk) of both types of schemes (Income&Growth) is in decline when new portfolios have been made. It has also been found that the unsystematic risk of the newly constructed portfolios of income as well as growth schemes is higher.

Keywords

Mutual Fund, Portfolio Construction, Diversifiable Risk, Market Index, Risk-Free Rate

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Subrata Roy ¹

Affiliations
1 Department of Commerce, Rabindra Mahavidyalaya, Affiliated to the University of Burdwan, Champadanga, Hooghly, West Bengal, IN

Abstract

In India, a large number of mutual fund schemes are available. Indian and foreign mutual fund institutions provide the schemes jointly. Generally, they provide different types of schemes like income, growth, balanced, gilt etc. These schemes are made in such a way that they fulfill certain objectives. Here, openended balanced mutual fund schemes are considered to examine the performance in the context of Indian capital market. The study uses popular measures of Treynor&Mazuy and Fama to achieve the major objectives, namely stock-selection, market timing and diversification performances of the open-ended balanced mutual fund schemes. The basic finding of the study is that the schemes have provided satisfactory returns to the investors. But, the managers have failed to reduce the magnitude of diversifiable risk. Therefore, the schemes have excessive unsystematic risk. Moreover, the managers cannot predict the market movement at right time; as a result, the managers are unsuccessful to generate extra returns due to poor market timing performance. Similarly, the managers cannot predict the security prices correctly due to poor stock selection performance.

Keywords

Mutual Fund, Market-Timing, Stock-Selection, Net-Selectivity, Diversification, Risk, Fama, Treynor & Mazuy.

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Subrata Roy ¹

Affiliations
1 Dept. of Commerce, Rabindra Mahavidyalaya, Champadanga, Hooghly, West Bengal, IN

Abstract

The present study seeks to examine the mutual fund performance of the open-ended selected equity schemes of UTI based on multi-index measures as well as conditional multi-index measure. It is observed from the analysis that multi-index measure is able to capture the beta and alpha effects on market adjusted basis and the estimated coefficients is a better representative as compared to the single index measure. When time lagged (lagged at 1 month, 2 months, quarterly and yearly) multi-index measures are applied then the estimated coefficients (alpha&beta) which are market adjusted and time adjusted look more representative than the multi-index measure (without lagged effect). Finally, when we extended the time lagged multi-index measure on a conditional way (conditional on public information variables) then we observe that conditional multi-index lagged measure provides much more representative results in all respects as compared to the all measures after conditioning public information effects.

Keywords

Single Index Measure, Multi-Index Measure, Conditional Multi-Index Measure, Stock Selection, Asset Class Exposures.

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Subrata Roy ¹

Affiliations
1 Associate Professor, Department of Commerce, Mahatma Gandhi Central University, Motihari, Bihar, India, IN

Abstract

In India, the performance evaluation of mutual fund based on the conditional model is scanty. This study focuses particularly on stock selection performance of the selected open-ended mutual fund schemes under the framework of conditional investment performance measure, over the period 2001 to 2019, by taking into consideration monthly closing NAV values. The study also considers 91-day Treasury bill rate as risk-free rate. Along with this, the study examines the difference in performances between the traditional model (unconditional) and the conditional model. The regression result is the absence of heteroscedasticity and multicollinearity problems. The time series data is also free from unit root. It is observed that the significant stock-selection performance is reduced after inclusion of public information in the conditional model, and the alpha values of the schemes are also reduced, compared to the unconditional model. The statistical test shows insignificant difference between the two measures.

Keywords

Conditional Model, Ferson, Mutual Fund, Performance Appraisal, Selectivity, Traditional Model

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