Do Mutual Funds Reward Downside Risk? Evidence from an Emerging Economy

P. Agarwal, H. Pradhan
{"title":"Do Mutual Funds Reward Downside Risk? Evidence from an Emerging Economy","authors":"P. Agarwal, H. Pradhan","doi":"10.1142/s0219091523500054","DOIUrl":null,"url":null,"abstract":"The increasing participation of retail investors — generally having limited risk bearing ability — in mutual funds, has surprisingly not motivated rigorous examination of downside risks-forward return relationship of these funds, which this study aims to accomplish. We use a survivorship-bias free database of returns and portfolio holdings of Indian equity mutual funds covering the period April 2008–November 2018 with Cornish–Fisher expansion of Value-at-Risk (VaR) as a measure of downside risk to examine downside risk-forward return relationship controlling for the fund characteristics such as age, size and style. To complete the story, we also test for the presence of Downside Risk Timing (DRT) ability of fund managers. We find that downside risk does predict future returns of mutual funds and the result holds across different fund sizes, age and styles, particularly strongly in large and midcap style. We also find that the fund manager of the median fund exhibits positive DRT at the 1- and 6-month horizons and negative at the 3- and 12-month horizons. The mixed evidence on DRT suggests that fund managers either did not possess the requisite risk-timing ability or had failed in its application. Findings have important implications for both investors and fund managers.","PeriodicalId":45653,"journal":{"name":"Review of Pacific Basin Financial Markets and Policies","volume":null,"pages":null},"PeriodicalIF":0.3000,"publicationDate":"2022-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Pacific Basin Financial Markets and Policies","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1142/s0219091523500054","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0

Abstract

The increasing participation of retail investors — generally having limited risk bearing ability — in mutual funds, has surprisingly not motivated rigorous examination of downside risks-forward return relationship of these funds, which this study aims to accomplish. We use a survivorship-bias free database of returns and portfolio holdings of Indian equity mutual funds covering the period April 2008–November 2018 with Cornish–Fisher expansion of Value-at-Risk (VaR) as a measure of downside risk to examine downside risk-forward return relationship controlling for the fund characteristics such as age, size and style. To complete the story, we also test for the presence of Downside Risk Timing (DRT) ability of fund managers. We find that downside risk does predict future returns of mutual funds and the result holds across different fund sizes, age and styles, particularly strongly in large and midcap style. We also find that the fund manager of the median fund exhibits positive DRT at the 1- and 6-month horizons and negative at the 3- and 12-month horizons. The mixed evidence on DRT suggests that fund managers either did not possess the requisite risk-timing ability or had failed in its application. Findings have important implications for both investors and fund managers.
查看原文
分享 分享
微信好友 朋友圈 QQ好友 复制链接
本刊更多论文
共同基金回报下行风险吗?来自新兴经济体的证据
散户投资者(通常风险承受能力有限)越来越多地参与共同基金,令人惊讶的是,这并没有促使本研究旨在完成的对这些基金的下行风险-远期回报关系的严格审查。我们使用无生存偏差的印度股票共同基金收益和投资组合持有数据库,涵盖2008年4月至2018年11月期间,并使用Cornish-Fisher风险价值扩张(VaR)作为下行风险的衡量标准,以检查下行风险-前瞻性回报关系,控制基金特征(如年龄、规模和风格)。为了完成这个故事,我们还测试了基金经理的下行风险时机(DRT)能力的存在。我们发现,下行风险确实可以预测共同基金的未来回报,而且这一结果在不同的基金规模、年龄和风格中都适用,尤其是在大盘股和中型股风格中。我们还发现,中位数基金的基金经理在1个月和6个月的范围内表现为正DRT,在3个月和12个月的范围内表现为负DRT。关于DRT的各种证据表明,基金经理要么不具备必要的风险择时能力,要么未能应用DRT。研究结果对投资者和基金经理都有重要意义。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 去求助
来源期刊
CiteScore
1.30
自引率
11.10%
发文量
36
期刊介绍: This journal concentrates on global interdisciplinary research in finance, economics and accounting. The major topics include: 1. Business, economic and financial relations among the Pacific rim countries. 2. Financial markets and industries. 3. Options and futures markets of the United States and other Pacific rim countries. 4. International accounting issues related to U.S. companies investing in Pacific rim countries. 5. The issue of and strategy for developing Tokyo, Taipei, Shanghai, Sydney, Seoul, Hong Kong, Singapore, Kuala Lumpur, Bangkok, Jakarta, and Manila as international or regional financial centers. 6. Global monetary and foreign exchange policy, and 7. Other high quality interdisciplinary research in global accounting, business, economics and finance.
期刊最新文献
Implications of pension and other post retirement benefit (oprb) recognition biases on leverage ratio components Fund Flows and Fund Performance on Lottery Funds Revisiting the negative profitability effect on capital structure: Pecking-order or trade-off hypothesis The Moral Licensing Effects of Corporate Reputation on Tax Planning Leveraging accounting professional identity of to pave a route towards sustainable development with role of inclusive leadership
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
现在去查看 取消
×
提示
确定
0
微信
客服QQ
Book学术公众号 扫码关注我们
反馈
×
意见反馈
请填写您的意见或建议
请填写您的手机或邮箱
已复制链接
已复制链接
快去分享给好友吧!
我知道了
×
扫码分享
扫码分享
Book学术官方微信
Book学术文献互助
Book学术文献互助群
群 号:481959085
Book学术
文献互助 智能选刊 最新文献 互助须知 联系我们:info@booksci.cn
Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。
Copyright © 2023 Book学术 All rights reserved.
ghs 京公网安备 11010802042870号 京ICP备2023020795号-1