Carhart and Q-Factor Views of Mutual Fund Performance

Abstract

This study evaluates the performances of 321 Malaysian equity mutual funds for the period of June 1998 to May 2015. These mutual funds appear to generate an average monthly rate of 0.6878 percent (8.25% per annum), a performance close enough to that of the market (8.42% per annum). The Jensen's alphas show that only around 22 percent of these funds significantly outperform the market. While multifactor models are expected to produce better explanatory power, Carhart rather than q-factor model seems to fit the Malaysian funds data better. The results reveal that (i) funds' returns are closely linked to market performance, (ii) effect of fund managers' stock selection and market timing skills are both weak and insignificant on fund performance, (iii) of the five investment styles exhibited in these multifactor models, only value (HML) and profitability (RMW) have gained attention from fund managers, (iv) adoption of RMW tend to give an equal chance of deteriorating and improving funds' returns. The results of this study in general imply that investors might be better off investing in the equity market directly and passively through index-tracking and buy-and-hold strategies that are less costly.

Performance of Local Versus International Focus Malaysian-based Mutual Funds

“…The results for the local content risk premiums indicate a moderate average daily size premium of 0.0043% (1.548% per annum) and a positive and economically large average daily momentum premium of 0.0205% (7.38% per annum). Meanwhile, HML reports a negative average daily return of -0.0004 (0.144% per annum), also consistent with the result found in an earlier study (Abdul-Rahim et al, 2017). For the global content risk premiums, the size effect is negative (0.648% per annum), but positive and economically meaningful for the value effect (5.04%) and more noticeably so for momentum (11.45%).…”

“…Summary of the regression results, reported in Table 3, show a slight improvement in the adjusted R 2 values (and percentage of significant F-value) than that generated through CAPM. This finding is also much higher than reported by Abdul-Rahim et al (2017) in which they find Carhart's average adjusted R 2 is only 4.45% and significant in only 47% of their sample funds. The clear difference between the two studies is in the frequency of data used, in that Abdul-Rahim et al 2017used monthly returns while this study uses daily returns.…”

“…This trend is consistent with empirical evidence in this market that has not been particularly favourable of its performance. Several studies (e.g., Abdullah & Abdullah, 2009;Abdul-Rahim et al, 2017;Low & Ghazali, 2005) in general attribute the poor performance to the fund managers' weak stock selectivity and market timing skills. The poor performance does not justify the sales charges and management fees that investors have to incur in the expectation that the FMCs will effectively compensate them with above-average performance.…”

Analisis SWOT bagi Perjanjian Komprehensif dan Progresif Perkongsian Trans-Pasifik (CPTPPA): Kes syarikat unit amanah di Malaysia

“…Kajian bagi SUA berkaitan teori risiko-pulangan menggunapakai model Markowit (1952), Treynor (1965, Sharpe (1966), Jensen (1968), Snail Trail, dan M-square (Norman et al, 2013;Mansor et al, 2015;Marzuki dan Worthington, 2015;Anwar Hasan 2017;Oh et al, 2017;Tan et al, 2017;Ruzita et al, 2017;Naz et al, 2017, Ameer Ali, 2017Shahrin, 2018;dan Abdul-Rahim et al, 2019). Hasil kajian mendapati bahawa pulangan dana unit amahah (DUA) mempunyai hubungan dengan kecekapan pengurus dalam membuat keputusan portfolio pelaburan berdasarkan tahap penerimaan risiko yang berbeza-beza (sama ada dana bersifat agresif atau pasif).…”

“…Justeru, SUA perlulah mempunyai keupayaan menawarkan produk yang menghasilkan pulangan yang tinggi. Oleh itu, SUA perlu memastikan bahawa pengurus dana mempunyai kemahiran yang baik bagi mempertingkatkan pencapaian DUA kepada tahap yang tertinggi (Ruzita et al, 2017…”