Time-varying performance of international mutual funds

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

13 Scopus Citations
View graph of relations

Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)334-348
Journal / PublicationJournal of Empirical Finance
Volume19
Issue number3
Publication statusPublished - Jun 2012
Externally publishedYes

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.

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review