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Performance attribution of mutual funds in India: outperformance or mis‐representation?
Author(s) -
Chauhan Gaurav Singh
Publication year - 2019
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12463
Subject(s) - market timing , equity (law) , fund of funds , passive management , business , institutional investor , attribution , monetary economics , global assets under management , hedge fund , economics , financial economics , actuarial science , finance , market liquidity , initial public offering , psychology , political science , social psychology , corporate governance , law
We conduct a novel holdings‐based performance attribution, particularly suited to emerging markets, for equity‐oriented active mutual funds in India. Although, we find significantly positive alphas for an average fund, the stated benchmarks are grossly mis‐specified. A style‐adjusted benchmark could beat the stated benchmarks by greater margins than the funds themselves. While funds’ trading activity consistently adds value, cash drag and market timing usually diminish value. Although, the best‐performing funds exhibit superior security selection abilities, their outperformance does not persist. However, despite the lack of persistence winner funds continue to generate significantly higher alphas than loser funds for quite some time.