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An Evaluation of Mutual Fund Performance in an Emerging Economy: The Case of Pakistan

Author

Listed:
  • Mehreen Mahmud

    () (Lahore School of Economics, Pakistan.)

  • Nawazish Mirza

    () (Lahore School of Economics, Pakistan.)

Abstract

This article examines the performance of Pakistan’s mutual fund industry during 2006–10, a period characterized both by bullish and bearish markets. An analysis of fund types reveals that Islamic funds have shown strong growth in spite of their lackluster performance compared to conventional funds. Income funds appear to have suffered as a consequence of the underdeveloped bond market, and very high t-bill rates have resulted in negative excess returns during the period. For stock funds, market indices and size are significant factors that indicate a preference for large-cap stocks of managers. With consistently negative or insignificant alphas, no fund manages to outperform the market.

Suggested Citation

  • 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.
  • Handle: RePEc:lje:journl:v:16:y:2011:i:sp:p:301-316
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    References listed on IDEAS

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    1. Cesari, Riccardo & Panetta, Fabio, 2002. "The performance of Italian equity funds," Journal of Banking & Finance, Elsevier, vol. 26(1), pages 99-126, January.
    2. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    3. Lai, Ming-Ming & Lau, Siok-Hwa, 2010. "Evaluating mutual fund performance in an emerging Asian economy: The Malaysian experience," Journal of Asian Economics, Elsevier, vol. 21(4), pages 378-390, August.
    4. Cuthbertson, Keith & Nitzsche, Dirk & O'Sullivan, Niall, 2008. "UK mutual fund performance: Skill or luck?," Journal of Empirical Finance, Elsevier, vol. 15(4), pages 613-634, September.
    5. 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.
    6. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    7. Bialkowski, Jedrzej & Otten, Roger, 2011. "Emerging market mutual fund performance: Evidence for Poland," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 118-130, August.
    8. Huij, Joop & Post, Thierry, 2011. "On the performance of emerging market equity mutual funds," Emerging Markets Review, Elsevier, vol. 12(3), pages 238-249, September.
    9. Mark M. Carhart & Jennifer N. Carpenter & Anthony W. Lynch & David K. Musto, 2002. "Mutual Fund Survivorship," Review of Financial Studies, Society for Financial Studies, vol. 15(5), pages 1439-1463.
    10. Klapper, Leora & Sulla, Victor & Vittas, Dimitri, 2004. "The development of mutual funds around the world," Emerging Markets Review, Elsevier, vol. 5(1), pages 1-38, March.
    11. 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.
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    Cited by:

    1. Shaikh, Salman, 2012. "Analysis of Islamic Mutual Funds Operations in Pakistan," MPRA Paper 42495, University Library of Munich, Germany.

    More about this item

    Keywords

    Mutual Funds; Fund Performance; Pakistan.;

    JEL classification:

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

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