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Performance Evaluation of Mutual Funds in Pakistan

  • S. M. Aamir Shah

    (Allama Iqbal Open University, Islamabad.)

  • Syed Tahir Hijazi

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

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    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.

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    Article provided by Pakistan Institute of Development Economics in its journal Pakistan Development Review.

    Volume (Year): 44 (2005)
    Issue (Month): 4 ()
    Pages: 863-876

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    Handle: RePEc:pid:journl:v:44:y:2005:i:4:p:863-876
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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.
    2. 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 133-57, April.
    3. William F. Sharpe, 1965. "Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 39, pages 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.
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