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Portfolio performance under dynamic systematic risk and conditional betas: The South African unit trust market

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  • Kalima, Bwalya

    (University of Johannesburg, Johannesburg, South Africa)

  • Gopane, Thabo

    (University of Johannesburg, Johannesburg, South Africa)

Abstract

This study examines whether South African unit trust managers can outperform the market and demonstrate distinct market-timing abilities under systematic dynamic risk. A conditional portfolio evaluation method is used under dynamic systematic risk. The BEKK–MGARCH model is applied to estimate the time-varying CAPM beta. The sample of the study includes 86 unit trust funds for the hardly studied multi-asset class between 2010 and 2019 in South Africa. The findings of the study show positive evidence that portfolio managers in the South African unit trust market possess some skills for market timing and outperformance. These results differ from most of the outcomes obtained through model-free performance-evaluation methods. The significant contribution of this study to the literature is in conditioning beta to both time and economic variables within the same asset pricing model, and then applying it to the emerging market of South Africa. Another strength of this paper is maintaining patient and formal adherence to econometric requirements of model validation. The empirical findings of the study should benefit portfolio managers, investors, and regulators with updated insight into the importance of considering both risk variability and changing economic factors in portfolio evaluation.

Suggested Citation

  • Kalima, Bwalya & Gopane, Thabo, 2022. "Portfolio performance under dynamic systematic risk and conditional betas: The South African unit trust market," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 66, pages 85-98.
  • Handle: RePEc:ris:apltrx:0447
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    References listed on IDEAS

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    More about this item

    Keywords

    portfolio performance evaluation; dynamic systematic risk; unit trust;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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