Performance Evaluation of German Large Cap Mutual Funds Relative to Different Benchmarks in the German Market PDF Download
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Author: Shuguang Bai
Publisher:
ISBN:
Category : Mutual funds
Languages : en
Pages : 66
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Book Description
Author: Shuguang Bai
Publisher:
ISBN:
Category : Mutual funds
Languages : en
Pages : 66
Get Book Here
Book Description
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We investigate the performance of a sample of German mutual equity funds over the period from 1994 to 2003. Our general finding is that mutual funds, on average, hardly produce excess returns relative to their benchmark that are large enough to cover their expenses. This conclusion is drawn from a variety of model specifications and is robust to many different benchmarks. Compared to unconditional measures, fund performance substantially deteriorates when we measure conditional alphas both in single-index and multi-factor models. We also measure fund performance in the Euler-equation framework and test several specifications of the stochastic discount factor using GMM. The result that funds underperform even before costs is even more pronounced. Overall, given the fact that stock returns are to some extent predictable by using publicly available information, conditional analysis raises the hurdle for active managers seeking abnormal positive performance, because it gives them no credit for exploiting readily available information.
Author: Maximilian Wegener
Publisher: GRIN Verlag
ISBN: 3656822301
Category : Business & Economics
Languages : en
Pages : 66
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Thesis (M.A.) from the year 2014 in the subject Business economics - Investment and Finance, grade: 7.5, Maastricht University, language: English, abstract: The following study examines the performance of mutual funds investing in small cap companies in the period from 1990 until 2013. Therefore, funds investing in small companies in Germany are tested on their ability to deliver risk-adjusted abnormal returns. The returns are risk-adjusted according to Fama French (1996) three-factor model, Carhart four-factor model and the liquidity adjusted five-factor model of Pastor and Stambaugh (2003). A separate examination of the internet crisis 2000 until 2003 and the financial crisis period 2008 until 2013 is done, to assess the ability of fund managers in isolation to examine their results in situations when their skills are most needed. On average, I conclude that fund managers, investing in the small capitalization segment in Germany, are not able to outperform the market even before fees.
Author: Nikola Jelicic
Publisher: diplom.de
ISBN: 3836644487
Category : Business & Economics
Languages : en
Pages : 101
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Book Description
Inhaltsangabe:Introduction: Measuring performance of fund managers is a topic equally interesting to practitioners and researchers. Most common performance measures rely on the assumption of constant risk during the entire evaluation period. The measure of risk is the beta from the Capital Asset Pricing Model (CAPM). In order to better assess a manager s investment ability, additional factors could be employed to capture the different sources of risk. The manager owes each portion of the achieved return to a certain risk factor. The risks a manager is running can be summed up to form his personal benchmark, which thus reflects the investment style. Still, the exposures to the included risk factors are assumed to be constant. The dynamics of the capital markets had not been captured by the prevailing performance measures before an approach that controlled for varying economic conditions was suggested. Models that are based on this approach deliver a beta conditional on the market state. The manager s exposure to the risk of the own benchmark was thus allowed to vary in time. Consequently, the search for indicators of the market states was launched and a model framework which could accommodate the chosen indicators as part of the benchmark had to be chosen. Two model frameworks emerged and a couple of indicators established themselves as standard. This study largely follows the approach of Ferson and Schadt. They introduced a linear model that can be perceived as a conditional version of the CAPM. The aim of this study is not only to obtain performance measures which result from the conditional models. Since the variation in the exposure to market risk is accounted for, one who employs conditional models gains insight into fund manager s trading. If the trading is reflected in changes of the beta, then inference on fund strategy is made possible even though information on the portfolio structure is not provided. The explanatory power of a conditional model depends on the researcher selecting a representative benchmark for the funds in the sample and indicators of economic conditions that fund managers rely on in reality. The structure of this paper is the following: chapter 2 builds the theoretical foundation of conditional models and presents their two forms; chapter 3 relates this study to previous literature in the area; chapter 4 employs conditional models to evaluate strategies and performance of German fund managers; chapter 5 sums up the [...]
Author: Carsten Fritz
Publisher: GRIN Verlag
ISBN: 3668325227
Category : Business & Economics
Languages : en
Pages : 70
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Master's Thesis from the year 2016 in the subject Economics - Finance, grade: 1,3, University of Regensburg (Centre of Finance), language: English, abstract: Financial markets are as complex as ever due to an accelerating development in the last decades. Especially evaluations of mutual fund performance have been a subject of interest since the introduction of financial services. In this thesis, a study on the performance of mutual funds investing in German equity from July 1995 to June 2015 is conducted. The aim is to find out if fund managers have sufficient skill to generate risk adjusted return in order to cover the cost imposed on the investors. Another purpose is to provide investors with relevant results. Inter alia, Jensen one-factor, Fama and French three-factor and the Carhart four-factor model are used as different benchmark models for performance. Paired bootstrap simulations suggest that, net of cost, a small fraction of fund managers do have sufficient skill to cover cost. For the bottom ranked funds, there is statistical evidence that their poor performance is caused by bad management, rather than by bad luck. The results for gross returns show that there is an unneglectable fraction of fund managers with good performance not due to luck. Compared to net returns, there is stronger evidence of skill, negative as well as positive. Form an investor’s point of view it seems rather beneficial to invest in passively managed vehicles. High costs eat into the return, and they are the main reason why the majority of actively managed funds end up with sub-par performance.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Silvia Coran
Publisher:
ISBN: 9783330503717
Category :
Languages : en
Pages : 116
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Author: Olaf Grewe
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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We examine the risk-adjusted performance of open-end mutual funds which invest mainly in German stocks. After briefly discussing the institutional environment in which these funds operate, we focus on the benchmark problem and the risk adjustment problem. Our data set includes all German funds sold to the public in 1972, our performance analysis covers the time period 1973 to 1998. In our empirical analysis, we first look at the rates of return of individual funds and at the unweighted average rates of return of all funds in our sample. When we apply the Sharpe and Jensen measure to the latter time series in the traditional way, the funds underperform the appropriate benchmarks by approximately 1.5% per year, which is significant both from the statistical and the economic perspective. Applying the Sharpe and the Jensen measure in the traditional way creates a bias from the perspective of long-term investors, because the analysis is based on the arithmetic, not the geometric mean return. To avoid this bias we look, in a second step, at the returns of investors who risk adjust their fund investments ex-ante by borrowing or lending with the objective, that the future risk of his levered portfolio matches that of the chosen benchmark. When we again apply the Sharpe and the Jensen measure to the unweighted average rates of return, the underperformance is reduced by 40%. For large funds, on the average, the underperformance is less than for small funds. When we look at the value-weighted means of individual fund returns, the underperformance nearly disappears.
Author: Christoph Schneider
Publisher: Diplomica Verlag
ISBN: 3836684470
Category : Business & Economics
Languages : en
Pages : 101
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The idea of comparing the performance of different risky investments, for example investment funds, on a quantitative basis dates back to the beginnings of the asset management industry and has been an important field of research in finance since then. Performance measures serve as valuable quantitative evidence for the portfolio manager's performance as well as for the evaluation of investment decisions ex post. Based on the idea of the capital asset pricing model proposed by Treynor, Sharpe and Lintner, Treynor developed the first quantitative performance measure intended to rate mutual funds, the Treynor Ratio. Since then, a large number of performance measures with very different characteristics have been developed. In addition to their power of rating investments ex post, their ability to predict future performance has been thoroughly analyzed by Grinblatt & Titman, Brown & Goetzmann, Carhart and others. Besides academia, the driving force behind the development of more sophisticated performance measures has always been the investors. This is understandable, as "the truly poor managers are afraid, the unlucky managers will be unjustly condemned, and the new managers have no track record. Only the skilled (or lucky) managers are enthusiastic." By combining and applying the results of previous research to a new sample of nearly 10,000 mutual funds that invest in different countries and asset classes, this thesis clarifies its central research question: Is the Information Ratio a useful and reliable performance measure? In order to answer this central question, it has been split up into the following sub-parts: What are the characteristics of a useful and reliable performance measure? What actually is "good" performance? Is the "good" performance a result of luck or of skilled decisions and does it persist over time? How does the Information Ratio compare to other performance measures, and what are its strengths and weaknesses? This empirical study aims at answeri
Author: Christoph Schneider
Publisher: diplom.de
ISBN: 3836632063
Category : Business & Economics
Languages : en
Pages : 99
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Inhaltsangabe:Abstract: I do not want a good General, I want a lucky one. (Napoleon Bonaparte). In contrast to Napoleon, investors typically do not want to pick a lucky person to administer their funds, but both Napoleon and the investor face a similar problem: how to separate the lucky from the skilled. Historic data shows that five out of one hundred portfolio managers achieve an outstanding performance just by luck, and statistics also reveal that luck in most cases does not persist over time. The lucky managers will, however, always cite their superior skills as a reason for their success, while the unsuccessful ones will place the blame on bad luck. By assessing all active managers on the two dimensions luck and skill, four groups are created. The separation of the skilled and lucky from the unskilled but lucky managers and the separation of the skilled but unlucky from the unskilled and unlucky managers is of special interest to all stakeholders in the investment industry. It is, therefore, the investor s task to apply understandable guidelines, preferably on a quantitative basis, when it comes to evaluating a portfolio manager. On the other hand, it is the fund administration s task to judge the performance of its managers objectively and to transfer the results into a variable remuneration scheme or to decide about the replacement of a certain manager. The idea of comparing the performance of different risky investments, for example investment funds, on a quantitative basis dates back to the beginnings of the asset management industry and has been an important field of research in finance since then. Performance measures serve as valuable quantitative evidence for the portfolio manager s performance as well as for the evaluation of investment decisions ex post. Based on the idea of the capital asset pricing model (CAPM) proposed by Treynor, Sharpe, and Lintner, Treynor developed the first quantitative performance measure intended to rate mutual funds, the Treynor Ratio. Since then, a large number of performance measures with very different characteristics have been developed. Besides academia, the driving force behind the development of more sophisticated performance measures has always been the investors. This is understandable, as the truly poor managers are afraid, the unlucky managers will be unjustly condemned, and the new managers have no track record. Only the skilled (or lucky) managers are enthusiastic . By combining and [...]
