The aim of this study is to provide the sovereign bond fund investor with a guide to finding the most profitable and sustainable investment strategy. For this purpose, a Global Sustainable Competitiveness Index is applied to a sample of 48 funds. We have conducted a best-in-class analysis, and our evidence supports the idea that the best strategy consists of investing in funds representing high GDP-per-capita countries, and registering the best-in-class sustainable performance scores. Additionally, other useful findings are that the screening of the funds is beneficial with respect to sustainable performance, and that there is no strong relationship between sustainability and GDP per capita.
This paper analyzes the cash flow timing skills of mutual fund investors, controlling for the hindsight effect (HE) by implementing the method developed by Hayley (2014) for stock market investors. Previous papers in the literature studying the timing skills of mutual fund investors do not control for this effect, which biases downward the actual timing skills of these investors. Accordingly, we analyze a sample of US domestic equity mutual funds in the period from January 1990 to January 2016. For each fund in the sample, we compute, over the entire period analyzed, the dollar-weighted monthly (DW) return, the geometric monthly (GM) return, the gap (the difference between the DW and the GM), the HE and the corrected timing measure after correcting for this effect. Before controlling for the HE, we find that mutual fund investors worsen the return that they achieve with their timing decisions by 1.80% annually (similar to the evidence provided previously in the literature). However, after controlling for the HE, we observe that investors really harm the returns that they achieve with their timing decisions by 0.71% annually. We establish several controls for different investment styles, and we obtain empirical evidence of the same phenomenon for all of them. Besides, we control for the size and age of the mutual fund (proxies for the level of information available for the fund). The results obtained indicate that investors in older and bigger funds show better timing skills than investors in younger and smaller funds. We also analyze how investors' level of sophistication affects our results by controlling for the net expense ratio, net income ratio, turnover ratio, institutional/non-institutional character, load/no-load regime and gap results. In general terms we observe that more sophisticated investors show better timing results and that the HE is more relevant to less sophisticated investors.
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