Stocks and Mutual Funds: Common Risk Factors? | Zendy

Paulo Rogério Faustino Matos | Zendy; José Alan Teixeira da Rocha | Zendy

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Stocks and Mutual Funds: Common Risk Factors?

Author(s) -

Paulo Rogério Faustino Matos,

José Alan Teixeira da Rocha

Publication year - 2009

Publication title -

brazilian business review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.176

H-Index - 4

ISSN - 1808-2386

DOI - 10.15728/bbr.2009.6.1.2

Subject(s) - capital asset pricing model , financial economics , economics , passive management , index (typography) , systematic risk , econometrics , stock exchange , stock (firearms) , stock market index , mutual fund , business , stock market , fund of funds , monetary economics , finance , market liquidity , mechanical engineering , paleontology , horse , world wide web , computer science , biology , engineering

In this article we analyze the capacity to price and predict the returns of stock mutual funds in the Brazilian market, using the capital asset pricing model (CAPM) and the factor models developed by Fama and French (1993) and Carhart (1997). The first results show an expected outcome: better pricing performance of the CAPM vis-a-vis the other models for mutual funds that track the Sao Paulo Stock Exchange Index (Ibovespa). The main contribution, however, consists of the evidence that the factor models perform better in pricing and in-sample forecasting of the returns of funds that outperform the market and have higher total assets. This evidence suggests that models should be constructed based on specific factors for investment funds that capture these effects, which is corroborated by the preliminary results in Linhares, Matos and Zech (2009).

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