Time-varying performance of international mutual funds
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
Detail(s)
Original language | English |
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Pages (from-to) | 334-348 |
Journal / Publication | Journal of Empirical Finance |
Volume | 19 |
Issue number | 3 |
Publication status | Published - Jun 2012 |
Externally published | Yes |
Link(s)
Abstract
We examine the ability of one- and two-factor regime switching models to describe US, developed, and emerging market mutual fund returns. We find that a two-factor fixed transition probability model adequately describes the multivariate series of mutual fund returns without the need to model time-varying transition probabilities. Mutual fund performance, as measured by a state dependent Jensen's alpha, varies with economic regimes that are defined according to the global equity market mean. Our primary two-factor fixed transition probability model shows that emerging market mutual fund alphas are often significantly positive in global bull regimes. Consideration of alternative second risk factors suggests that both the foreign exchange factor, or the recently proposed Hou, Karolyi and Kho (2011) value factor can improve series forecasts and out-of-sample portfolio performance. © 2012 Elsevier B.V.
Research Area(s)
- Fixed transition probabilities, Forecasting, Mutual fund performance, Regime-switching models
Citation Format(s)
Time-varying performance of international mutual funds. / Turtle, H. J.; Zhang, Chengping.
In: Journal of Empirical Finance, Vol. 19, No. 3, 06.2012, p. 334-348.
In: Journal of Empirical Finance, Vol. 19, No. 3, 06.2012, p. 334-348.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review