Investment performance analysis of managerial expertise

Evidence from Malaysian-based international equity unit trust funds

Research output: Contribution to journalArticle

Abstract

This paper evaluates the investment performance of Malaysian-based international equity funds. The results on the overall fund performance using Jensen's (1968) model indicate that, on average, international funds have significant negative risk-adjusted returns over the study period from 2008-2010. Since the model ignores market timing activity, it implicitly attributes the overall negative return to manager's poor stock selection ability. However, the performance breakdown results on managerial expertise using the models of Treynor and Mazuy (1966) and Henriksson and Merton (1981) show evidence of positive selectivity and negative market timing returns. Taken together, the highly significant negative timing returns suggest that, on average, international fund managers have perverse market timing ability. The paper finds little evidence that Malaysian investors achieve diversification benefits from investing in overseas equity markets.

Original languageEnglish
Pages (from-to)41-51
Number of pages11
JournalJurnal Pengurusan
Volume38
Publication statusPublished - Sep 2013

Fingerprint

Market timing
Trust funds
Investment performance
Performance analysis
Equity
Unit trusts
Expertise
Diversification benefits
Fund performance
Investing
Selectivity
Risk-adjusted returns
Managers
Breakdown
Investors
Stock selection
Equity markets
Fund managers

Keywords

  • Fund performance
  • International equity funds
  • Market timing
  • Security selection

ASJC Scopus subject areas

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

Cite this

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title = "Investment performance analysis of managerial expertise: Evidence from Malaysian-based international equity unit trust funds",
abstract = "This paper evaluates the investment performance of Malaysian-based international equity funds. The results on the overall fund performance using Jensen's (1968) model indicate that, on average, international funds have significant negative risk-adjusted returns over the study period from 2008-2010. Since the model ignores market timing activity, it implicitly attributes the overall negative return to manager's poor stock selection ability. However, the performance breakdown results on managerial expertise using the models of Treynor and Mazuy (1966) and Henriksson and Merton (1981) show evidence of positive selectivity and negative market timing returns. Taken together, the highly significant negative timing returns suggest that, on average, international fund managers have perverse market timing ability. The paper finds little evidence that Malaysian investors achieve diversification benefits from investing in overseas equity markets.",
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AB - This paper evaluates the investment performance of Malaysian-based international equity funds. The results on the overall fund performance using Jensen's (1968) model indicate that, on average, international funds have significant negative risk-adjusted returns over the study period from 2008-2010. Since the model ignores market timing activity, it implicitly attributes the overall negative return to manager's poor stock selection ability. However, the performance breakdown results on managerial expertise using the models of Treynor and Mazuy (1966) and Henriksson and Merton (1981) show evidence of positive selectivity and negative market timing returns. Taken together, the highly significant negative timing returns suggest that, on average, international fund managers have perverse market timing ability. The paper finds little evidence that Malaysian investors achieve diversification benefits from investing in overseas equity markets.

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