Malaysian unit trust funds’ performance during up and down market conditions: A comparison of market benchmark

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

Purpose – The paper seeks to examine whether selectivity and timing performance of fund manager is sensitive to the choice of market benchmarks. The two benchmarks used are the Kuala Lumpur Composite Index (KLCI) and the Exchange Main Board All-Share (EMAS) Index. Design/methodology/approach – The paper seeks to employed Jensen's model to estimate the overall fund performance and Henriksson and Merton's model to separate the fund manager's investment performance into the selectivity and market-timing components. Findings – The findings indicate that, on average, the funds display negative overall performance with either the KLCI or the EMAS Index. In addition, there is little variation in the manager's market-timing and selectivity performance across alternative market benchmarks. It is also reported that a manager's poor timing ability contributes significantly to the fund's negative overall performance. Research limitations/implications – The paper employed just two market benchmarks. Inclusion of more market benchmarks in future research may provide further support for the existing findings. Practical implications – Regardless of the market benchmarks used, the results imply that fund managers should seriously reassess their market timing efforts, given that their predictions are very often in the wrong direction than in the right direction. Such findings suggest that no economic benefit accrues to the average fund manager involved in market-timing activities. Originality/value – The paper provides first evidence on the sensitivity of a fund manager's separate investment components (timing and selectivity) to different specification of the market benchmarks.

Original languageEnglish
Pages (from-to)154-166
Number of pages13
JournalManagerial Finance
Volume33
Issue number2
DOIs
Publication statusPublished - 23 Jan 2007
Externally publishedYes

Fingerprint

Trust funds
Fund performance
Market conditions
Benchmark
Unit trusts
Fund managers
Market timing
Selectivity
Composite index
Managers
Investment performance
Inclusion
Economic benefits
Merton model
Design methodology
Prediction

Keywords

  • Fund management benchmarking
  • Malaysia
  • Market outing
  • Securities
  • Unit trusts

ASJC Scopus subject areas

  • Finance
  • Strategy and Management

Cite this

Malaysian unit trust funds’ performance during up and down market conditions : A comparison of market benchmark. / Low, Soo Wah.

In: Managerial Finance, Vol. 33, No. 2, 23.01.2007, p. 154-166.

Research output: Contribution to journalArticle

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