An investigation into the performance and persistence of actively managed equity mutual funds in the U.S

Wu, Wendi (2018) An investigation into the performance and persistence of actively managed equity mutual funds in the U.S. [Dissertation (University of Nottingham only)]

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Abstract

This paper aims to investigate the performance of U.S equity mutual funds under active management to find whether fund managers can gain excess returns by superior stock selection and market timing abilities using data from 2007 to 2017. The Capital Asset Pricing Model (CAPM) and four-factor model are used to analyse fund performance. A Market timing model developed by Treynor and Mazuy (1966) is applied for market timing ability analysis. Furthermore, the persistence of mutual fund performance is investigated by forming four equally weighted portfolios based on the previous period’s performance.

There is little evidence showing outperformance and market timing for the U.S mutual funds in the whole sample period. However, during the financial crisis from 2007 to 2009, some interesting findings are observed. More funds exhibited positive alphas and generated excess returns and there is strong evidence supporting market timing ability during that period. Moreover, mutual funds did not exhibit persistent performance. This paper provides updated research towards the U.S mutual fund market, and helps investors and fund managers understand the fund market better.

The findings in this paper suggest that buying last year’s winner funds might not produce the same superior returns and that it would be better off to invest in index funds rather than mutual funds when the economy is under stable status.

Item Type: Dissertation (University of Nottingham only)
Keywords: Mutual funds
Depositing User: WU, Wendi
Date Deposited: 21 Feb 2022 16:36
Last Modified: 21 Feb 2022 16:36
URI: http://eprints.nottingham.ac.uk/id/eprint/53847

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