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Mutual Fund Return Predictability in Partially Segmented Markets

Author

Listed:
  • Banegas, Ayelen

    (University of CA, San Diego)

  • Timmermann, Allan

    (University of CA, San Diego)

  • Gillen, Ben

    (CA Institute of Technology)

  • Wermers, Russ

    (University of MD)

Abstract

This paper studies the predictability of European equity mutual fund performance during a period when European stock markets were partially segmented. Specifically, we use macroeconomic variables to predict the performance of European equity funds, including Pan-European, country, and sector funds. We find that macro-variables are useful in locating funds with future outperformance, and that country-specific mutual funds provide the best opportunities for fund rotation strategies using macroeconomic information. Specifically, our baseline long-only strategies provide four-factor alphas of 7-12%/year over the 1993-2008 period. Our study provides new evidence on the benefits of local asset managers in segmented markets, as well as how macroeconomic information can be used to locate and exploit these benefits.

Suggested Citation

  • Banegas, Ayelen & Timmermann, Allan & Gillen, Ben & Wermers, Russ, 2011. "Mutual Fund Return Predictability in Partially Segmented Markets," Working Papers 11-14, University of Pennsylvania, Wharton School, Weiss Center.
    • Handle: RePEc:ecl:upafin:11-14
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    File URL: http://fic.wharton.upenn.edu/fic/papers/11/11-14.pdf
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    Cited by:

    1. Vidal-García, Javier, 2013. "The persistence of European mutual fund performance," Research in International Business and Finance, Elsevier, vol. 28(C), pages 45-67.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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