Uk Open-Ended Mutual Funds Industry Pre and Post the Global Financial Crisis: Performance Persistence and Return Attribution
“UK Open-Ended Mutual Funds Industry pre and post the Global Financial Crisis: Performance Persistence and Return Attribution” By Dimitris Xydias
Abstract
This dissertation project tests the persistence in performance of a survivorship bias controlled sample of 574 UK Open-End Mutual Funds for the period between 31/12/1999 and 31/12/2011 and decomposes the funds’ returns into factors. The former is done by employing both parametric and non-parametric approaches to identify persistence and the latter by using the Carhart (1997) fourfactor asset-pricing model. The unique character of this project lies on the separation of the examination period into two sub-periods in order to identify whether the industry’s return characteristics were different before and after the Global Financial Crisis (GFC) -of 2008. The overall results suggest that there is evidence of persistence in the performance of MFs during the early years of this millennium. However, this pattern ceases to exist in 2008 and appears again in 2011. Moreover, the analysis indicates that as we move from short to longer time intervals the persistence decreases and the losing persistence prevails over the winning. Furthermore, I find that only two of Carhart’s factors appear to be statistically significant and useful to explain some of the fluctuations of an equally weighted portfolio of MFs both during the pre and post-crisis periods.
This dissertation is submitted as part of the requirements for the award of the
MSc in Investment Management Cass Business School - City University London August 2012
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Acknowledgements I would like to thank Dr. Elena Kalotychou for her supervision and overall assistance during the preparation of this dissertation project. I would also like to thank Athanasios Papanikolaou and Vinitt Bawri for their helpful comments throughout the process. This dissertation is a result of my own work. Material from the published or unpublished work of others, which is referred
Abstract
This dissertation project tests the persistence in performance of a survivorship bias controlled sample of 574 UK Open-End Mutual Funds for the period between 31/12/1999 and 31/12/2011 and decomposes the funds’ returns into factors. The former is done by employing both parametric and non-parametric approaches to identify persistence and the latter by using the Carhart (1997) fourfactor asset-pricing model. The unique character of this project lies on the separation of the examination period into two sub-periods in order to identify whether the industry’s return characteristics were different before and after the Global Financial Crisis (GFC) -of 2008. The overall results suggest that there is evidence of persistence in the performance of MFs during the early years of this millennium. However, this pattern ceases to exist in 2008 and appears again in 2011. Moreover, the analysis indicates that as we move from short to longer time intervals the persistence decreases and the losing persistence prevails over the winning. Furthermore, I find that only two of Carhart’s factors appear to be statistically significant and useful to explain some of the fluctuations of an equally weighted portfolio of MFs both during the pre and post-crisis periods.
This dissertation is submitted as part of the requirements for the award of the
MSc in Investment Management Cass Business School - City University London August 2012
-0-
Acknowledgements I would like to thank Dr. Elena Kalotychou for her supervision and overall assistance during the preparation of this dissertation project. I would also like to thank Athanasios Papanikolaou and Vinitt Bawri for their helpful comments throughout the process. This dissertation is a result of my own work. Material from the published or unpublished work of others, which is referred
References: - 45 - Carhart, M., 1997, ‘On persistence in mutual funds performance’, Journal of Finance, Vol - 48 - Quigley, Garrett, Sinquefield, Rex, 2000, ‘Performance of UK equity unit trusts.’ Journal of Asset Management 1, pp