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International Mutual Fund Performance and Political Risk

Author

Listed:
  • Barrie A. Bailey

    (Monmouth University, USA)

  • Jean L. Heck

    (Dept. of Finance, Villanova University, Villanova, PA 19085, USA)

  • Kathryn A. Wilkens

    (Worcester Polytechnic Institute, USA)

Abstract

Recent years have witnessed phenomenal growth in both the number and size of US based international equity mutual funds. While the benefits of international diversification are well documented in the literature, empirical research relating to the performance of international mutual funds has been limited and contradictory. The purpose of this study is to examine the impact of political risk on the risk-adjusted returns of international mutual funds using a modified event study methodology. More specifically, the dummy variable event study methodology using portfolios rather than individual funds is used. This methodology addresses the problems of multiple event days and calendar clustering. The macro political risk event of interest is the Iraqi invasion of Kuwait. Results of the study suggest that shareholders of international equity mutual funds earn significant abnormal returns in the face of political turmoil.

Suggested Citation

  • Barrie A. Bailey & Jean L. Heck & Kathryn A. Wilkens, 2005. "International Mutual Fund Performance and Political Risk," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 167-184.
    • Handle: RePEc:wsi:rpbfmp:v:08:y:2005:i:01:n:s0219091505000312
    DOI: 10.1142/S0219091505000312
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    Citations

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    Cited by:

    1. Rungmaitree, Pattamon & Boateng, Agyenim & Ahiabor, Frederick & Lu, Qinye, 2022. "Political risk, hedge fund strategies, and returns: Evidence from G7 countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    2. Marek Szymański & Grzegorz Wojtalik, 2022. "Wpływ wyborów politycznych na ceny akcji na Giełdzie Papierów Wartościowych w Warszawie," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 3, pages 290-306.
    3. Sherif, Mohamed & Chen, Jiaqi, 2019. "The quality of governance and momentum profits: International evidence," The British Accounting Review, Elsevier, vol. 51(5).
    4. Sulaiman Al-Jassar & Imad A. Moosa, 2020. "Country Effects, Industry Effects and the Effectiveness of International Diversification Within the GCC Region," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-18, January.
    5. Anastasia Petraki & Anna Zalewska, 2017. "Jumping over a low hurdle: personal pension fund performance," Review of Quantitative Finance and Accounting, Springer, vol. 48(1), pages 153-190, January.
    6. Wan-Jiun Paul Chiou & Vigdis W Boasson, 2015. "International Variations in the Benefits of Feasible Diversification Strategies," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-38, December.
    7. repec:dau:papers:123456789/13772 is not listed on IDEAS

    More about this item

    Keywords

    Mutual funds; international; political risk; Middle East;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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