Carhart and Q-factor views of mutual fund performance

Ruzita Abdul Rahim, Rafidah Othman, Ling Pick Soon

Research output: Contribution to journalArticle

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.

Original languageEnglish
JournalJurnal Pengurusan
Volume51
Publication statusPublished - 1 Jan 2017

Fingerprint

Factors
Mutual fund performance
Mutual funds
Multifactor model
Fund managers
Market timing
Fund performance
Investing
Investment style
Equity
Investors
Index tracking
Stock market
Stock selection
Equity markets
Profitability
Market performance

Keywords

  • Carhart model
  • Investment styles
  • Jensen's alpha
  • Market timing
  • Multifactor model
  • Mutual funds
  • Q-factor model
  • Stock selection

ASJC Scopus subject areas

  • Business and International Management
  • Accounting
  • Business, Management and Accounting (miscellaneous)

Cite this

Carhart and Q-factor views of mutual fund performance. / Abdul Rahim, Ruzita; Othman, Rafidah; Soon, Ling Pick.

In: Jurnal Pengurusan, Vol. 51, 01.01.2017.

Research output: Contribution to journalArticle

Abdul Rahim, Ruzita ; Othman, Rafidah ; Soon, Ling Pick. / Carhart and Q-factor views of mutual fund performance. In: Jurnal Pengurusan. 2017 ; Vol. 51.
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