Performance of Dutch mutual equity funds using a time-varying approach
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2019-08-08
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en
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Abstract
Testing a mutual equity fund’s performance, using the traditional CAPM and four-factor model is considered to have one major downside; the stationary beta. In these unconditional models, the risk loadings are assumed to be constant throughout the tested timespan. However, an actively managed fund would adapt its beta throughout time, in order to beat the market. This study uses a free of ‘survivorship bias’ dataset of fifteen domestic and 64 global Dutch mutual equity funds. The unconditional and time-varying variants of the four-factor model by Carhart (1997) are used to estimate the performance of both types of funds over the period 2000-2018. Using different benchmarks for the two fund types and despite using raw returns (excluding managing fees and other costs), the actively managed funds are not able to outperform the market when controlled for the tested risk factors. It also shows that there is little difference in performance between the two fund types when tested against similar benchmarks.
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Faculteit der Managementwetenschappen