Towards Risk Adjusted Performance Appraisal of Indian Mutual Funds

Authors:

Atanu Das,

DOI NO:

https://doi.org/10.26782/jmcms.2019.02.00008

Keywords:

Mutual fund,Risk adjusted performance,Sharp index,Optimal portfolio,

Abstract

This paper is based on the study of mutual funds in India which is understood to be one of the most vibrant in the money market. This paper analyses a set of representative schemes from heterogeneous group of different fund houses. There are well established criteria to judge their performance absolutely and also in relative terms. This paper deals with the analysis of risk-returns parameters of different mutual fund schemes and the relation between the risk preference of the investors and the risk adjusted performance (RAP) measure based on real time data. Various tests are applied to evaluate the performance of mutual funds based on well established measures and those tests have been used to rank the funds accordingly. Some hypotheses are constructed and tested to find out whether there are significant differences in their absolute and RAP. The paper also proposed an easy and practical path to solve an optimal portfolio problem containing the various mutual fund schemes. The analysis is carried out with the help of William Sharpe’s single index model and result could of use to substantial investors who are choosing an optimum portfolio of various mutual funds.

Refference:

I.A. Shah, S. Thomas, M. Gorham, India‟s Financial Market: An Insider‟s Guide, How the Markets Work, Academic Publishers, 2008.

II.B. Roy and S. S. Deb, “Conditional Alpha and Performance Persistence for Indian Mutual Funds: Empirical Evidence”, ICFAI Journal of Applied Finance, pp. 30-48, January, 2004.

III.E.Thanou,“Mutual Fund Evaluation During Up and Down Market Conditions: The Case of Greek Equity Mutual Funds”, International Research Journal of Finance and Economics, Vol.:13, pp. 84-93, 2008.

IV.G. Elton, G. Brown, “Modern portfolio theory and investment analysis”, 7th edition, John Wiley & Sons, Inc, 2007.

V.J. A. Haslem, Mutual funds: risk and performance analysis for decision making. John Wiley & Sons, 2009.

VI.J. D. Jobson, and B. Korkie, “Performance Hypothesis Testing with the Sharpe and Treynor Measures”, Journal of Finance, 36, 888-908, 1981.

VII.K. Daniel, M. Grinblatt, S. Titman and R. Wermers, “Measuring mutual fund performance with characteristic-based benchmarks”, Journalof Finance 52, 1035–1058, 1997.

VIII.L. Chan, H. Chen and J. Lakonishok, “On Mutual Fund Investment Styles”, The Review of Financial Studies, Vol.: 15, Issue: 5, pp. 1407-1437, 2002.

IX.M. C.Jensen, “The performance of mutual funds in the period 1945–1964”, The Journal of finance, Vol.: 23, Issue: 2, pp. 389-416, 1968.

X.M. Jayadev, “Mutual Fund Performance: An Analysis of Monthly Returns”, Finance India, Vol.: X, No.: 1, pp. 73–84, 1996

XI.N. D.Rao, “Investment Styles and Performance of Equity Mutual Funds in India”, available at SSRN http://ssrn.com/abstract=922595, 2006.

XII.P. K. Muthappan and E. Damodharan, “Risk-Adjusted Performance of Indian Mutual Funds Schemes”,Finance India,Vol.: 20, Issue: 3, 2006.

XIII.R. Bahadur, P. S. Koirala, “Application of Markowitz and Sharpe Models in Nepalese Stock Market”, The Journal of Nepalese Business Studies, Vol.: III, No.: 1, 2006.

XIV.S. D. Groot, and A. Plantinga, Risk-Adjusted Performance Measures and Implied Risk-Attitudes”, available at http://ssrn.com/abstract=289193, Nov 2001.

XV.S. H. Thomas and A. P. Ralph, “Equity Mutual Fund Historical Performance Ratings as Predictors of Future Performance”, Journal of Financial and Strategic Decisions, Vol.: 9, No.: 1, 1996.

XVI.S. Lee, and S. Stevenson, “Testing the Statistical Significance of Sector and Regional Diversification. Journal of Property Investment, and Finance, Vol.: 23, Issue: 5, pp. 394–411, 2005.

XVII.S. Sankaran, Indian Mutual Funds Handbook , A Guide For Industry Professionals And Intelligent Investors, 2nd ed., Vision Books, 2008.

XVIII.W. F. Sharpe, “The Sharpe Ratio”, Journal of Portfolio Management, Vol.: 21, 1994.

XIX.W. Sharpe, G. J. Alexander, J. W. Bailey, Investment, PHI (2006).

XX.Y. Ali, “Simplifying the Portfolio Optimization Process via Single Index Model”, available http://www.iems.northwestern.edu/docs/undergraduate/honors/Ali.pdf, 2008.

Atanu Das View Download