STRATEGIC CONDUCT AND PERFORMANCE PERSISTENCE OF MUTUAL FUNDS IN PAKISTAN

Bilal Nafees, Muhammad Ali Jibran Qamar, Abdul Haque

Abstract


This research is an attempt to empirically analyse the strategic
behaviour i.e. selectivity and timing skills of mutual fund managers
and persistence in performance of mutual funds in Pakistan using
data set of thirty-three open end equity based mutual funds from June
2008-2016. Strategic behaviour has been analysed through proposed
methodology by Jensen Alpha, Treynor & Mazuy and Henriksson &
Merton. Persistence in risk adjusted performance has been evaluated
using Sharpe, Treynor and Sortino measures. Results indicate that
only few mutual fund managers possess either significant selectivity
or outstanding timing skills in Pakistan. This implies that most of the
mutual fund managers are either speculative or inside traders.
Persistence in performance of mutual funds is not strong enough
because performance of fewer mutual funds exceeds the performance
of capital market. Mutual funds that exhibit positive risk premium
also exhibited underperformance after the adjustment of risk factor.


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