Empirical Analysis Of International Mutual Fund Performance

Abstract

Since 1990 there has been a tremendous growth in the investment in international mutual funds. This growth is likely to continue as domestic stock market cools down and more U.S. investors seek higher returns as well as the diversification benefits of foreign assets. Investors are also attracted to international funds in the belief that such funds earn abnormally high returns because of the previous relative inefficiency in those markets. This study examines the annual risk-adjusted returns using Sharpes Index for ten portfolios of international mutual funds for the period September 2000 through September 2006. The international funds were analyzed by combining the funds into individual portfolios based on sector, geographics and company size. The benchmarks for comparison were the U.S. mutual fund performance reported by MorningStar. The risk-adjusted returns were then determined and compared to each other and to the U.S. market. During this period, nine out of ten of the international mutual fund portfolios outperformed the U.S. market. The portfolio that contained all International Mutual Funds (IMF) significantly outperformed on a risk-adjusted basis the fund that was made up of all of the U.S. stock mutual funds, (All U.S. Stock Funds- USSF). Additionally, the Foreign Small Value (FSV) portfolio, Foreign Small Growth (FSG) portfolio, Emerging Markets (EM) portfolio, Latin America (LA) portfolio, and the Pacific Asia without Japan (PA-J) portfolio all had average annual returns (not adjusted for risk) that exceeded USMFs returns by more than 10 percent.

Mutual Funds’ Performance Sensitivity to Funds’ Attributes. Case Study: Saudi Mutual Funds

“…The funds were however, negatively related to systematic risk, same as in Mohammad (2013) and Surang (2022). The target had a negative impact on fund returns, signaling a better performance with international investments, similar to the findings in Rao and Aggarwal (1987), Detzler and Wiggins (1997), Boudreaux Et Al (2007). A positive association of the fund performance to faith factor, unlike in Adams & Ahmed (2012), indicates that Islamic funds rely in part on Sharia compliant investments and strategies to improve their performances.…”

“…The decision depends on the size of the market opportunity, diversification opportunities or issues, political stability, emerging versus developed markets preferences and social-cultural boundaries. Going global provides access to fastest-growing markets, even with high level of risk, as confirmed by Boudreaux et al (2007). Currency risk, however, should be appropriately hedged.…”

Style Drift and Alphas: A Case Study in International Retail Funds

“…Some studies find no evidence of positive abnormal returns (Cumby & Glen, 1990;Droms & Walker, 1994;Tsai & Wu, 2015) whilst others find that performance results depend on the benchmark index used for comparison (Eun, Kolodny, and Resnick, 1991). Other papers have found consistent evidence of abnormal performance (Redman, Gullet, and Manakyan, 2000;Boudreaux, Rao, Ward, and Ward, 2007) but reach different conclusions regarding performance persistence. In a study of international equity funds, Droms and Walker (2001) find statistically significant performance persistence for very short-term (1-year) holding periods only.…”

A Comparative Analysis of Fixed Income Unit Trust Funds versus Equity Unit Trust Funds in Malaysia

“…Another perspective on mutual funds studies was examining the performance of funds investing locally and internationally. Most studies in the U.S. found that funds invested internationally outperformed locally invested funds (Redman, Gullet, & Manakyan, 2000;Boudreaux, Uma Rao, Ward, & Ward, 2007) whereas in the U.K., evidence showed that funds invested outside of the U.K. did not produce superior performance as compared to the locally invested funds (Abel & Fletcher, 2004;Fletcher, 1999;Fletcher & Marshall, 2005).…”