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Performance Evaluation of Mutual Funds in Pakistan

Author

Listed:
  • S. M. Aamir Shah

    (Allama Iqbal Open University, Islamabad.)

  • Syed Tahir Hijazi

    (Faculty of Business Administration, Mohammad Ali Jinnah University, Islamabad.)

Abstract

This paper presents an overview of the Pakistani mutual fund industry and also evaluates mutual fund performance using a survivorship bias controlled sample of funds. By the end of financial year 2004, 112 billion rupees were invested in mutual funds. The main purpose of this study is to examine the risk and return characteristics of Pakistan equity mutual funds and balanced funds. Risk-adjusted performance is evaluated using three evaluation techniques, i.e., Sharpe Ratio, Treynor Ratio, and Jensen differential measure. The overall results suggest that mutual funds in Pakistan are able to add value as indicated by their positive after-cost alphas. Our results are similar to the results of studies carried out on European mutual funds performance. However, our results deviate from most United States studies wherein it is investigated and stated that mutual funds under-perform the market by the amount of expenses they charge.

Suggested Citation

  • S. M. Aamir Shah & Syed Tahir Hijazi, 2005. "Performance Evaluation of Mutual Funds in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 863-876.
    • Handle: RePEc:pid:journl:v:44:y:2005:i:4:p:863-876
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    File URL: http://www.pide.org.pk/pdf/PDR/2005/Volume4/863-876.pdf
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    References listed on IDEAS

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    1. Roger Otten & Dennis Bams, 2002. "European Mutual Fund Performance," European Financial Management, European Financial Management Association, vol. 8(1), pages 75-101, March.
    2. David Blake & Allan Timmermann, 1998. "Mutual Fund Performance: Evidence from the UK," Review of Finance, European Finance Association, vol. 2(1), pages 57-77.
    3. William F. Sharpe, 1965. "Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 39, pages 119-119.
    4. Rogér Otten & Dennis Bams, 2004. "How to measure mutual fund performance: economic versus statistical relevance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(2), pages 203-222, July.
    5. Elton, Edwin J & Gruber, Martin J & Blake, Christopher R, 1996. "The Persistence of Risk-Adjusted Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 69(2), pages 133-157, April.
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    Cited by:

    1. Arif, Imtiaz & Jawaid, Tehseen, 2011. "Effect of Fund Managers' Characteristics on Mutual Funds Performance and Fee in Emerging Market of Paksitan," MPRA Paper 58936, University Library of Munich, Germany.
    2. Zabiulla, 2012. "Macro Forecasting Abilities of Mutual Fund Managers in the Indian Capital Market," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 3(2), pages 06-11, May.
    3. repec:ksb:journl:v:10:y:2017:i:1:p:57-80 is not listed on IDEAS
    4. Shafique, Attayah & Ayub, Usman & Zakaria, Muhammad, 2019. "Don’t let the Greed catch you! Pleonexia rule applied to Pakistan stock exchange," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 524(C), pages 157-168.
    5. Farah Naz & Hafsa Khan & Muhammad Ishfaq Ahmad & Ramiz Ur Rehman & Muhammad Akram Naseem, 2019. "Productivity and efficiency analysis of Pakistani mutual funds using Malmquist index approach," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 1-21, September.
    6. Samiuddin Shaikh & Aisha Bashir Shah & Fawad Ashraf, 2017. "Credit Obtaining Challenges Faced by Micro and Small and Medium Enterprises SMEs," KASBIT Business Journals (KBJ), Khadim Ali Shah Bukhari Institute of Technology (KASBIT), vol. 10, pages 57-80, December.
    7. Mehreen Mahmud & Nawazish Mirza, 2011. "An Evaluation of Mutual Fund Performance in an Emerging Economy: The Case of Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 301-316, September.
    8. Syed Faizan Ahmed & Dr. Riaz Hussain Soomro, 2017. "Analyzing Performance of Islamic and Conventional Funds Listed In Karachi Stock," KASBIT Business Journals (KBJ), Khadim Ali Shah Bukhari Institute of Technology (KASBIT), vol. 10(Special I), pages 6-30, May.
    9. Muhammad Zeeshan & Jiabin Han & Alam Rehman & Kashif Saleem & Raza Ullah Shah & Amir Ishaque & Naveed Farooq & Arif Hussain, 2020. "Conventional Mutual Funds Out Perform Islamic Mutual Funds in the Context of Pakistan. A Myth or Reality," International Journal of Economics and Financial Issues, Econjournals, vol. 10(4), pages 151-157.
    10. Ayub, Usman & Qaddus, Uzma & Zakaria, Muhammad & Shafique, Attayah & Ahmed, Junaid, 2018. "Thou should not panic! Let calmness fight the Crocodile Bite," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 302-315.

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