Abstract
Mutual funds have become an attractive investment option particularly for small investors to diversify their portfolio. The aim of this study is to explore the determinants of close ended mutual funds return in Pakistan. For this purpose secondary data is used from 2007-2013. Multiple regression analysis is carried out to measure the determinants (fund size, liquidity, expense ratio and fund turnover) of fund return. The findings of the study revealed that expense ratio and fund turnover significantly influences the return of the fund. Moreover, fund size is positively related to fund return whereas expense ratio, fund turnover and liquidity are inversely related to fund return.
Highlights
Mutual funds have experienced exponential growth all over world and have become an attractive investment option for small investors
In empirical literature we find a number of studies that focused on analyzing the effect of fund attributes on the performance of mutual fund return (Soderlind, Magnus & Engstrom, 2000; Korkeamaki & Smythe, 2004)
For this study a total of 15 close-ended mutual funds were considered, the final sample comprised of 12 mutual funds because only those mutual funds were selected for this study that remained
Summary
Mutual funds have experienced exponential growth all over world and have become an attractive investment option for small investors. Since mutual funds pools money from individual as well as organizations and invests these funds in various stocks, bonds and other assets, it helps investor’s small investors to diversify their investment by investing in mutual funds. Small investors due to their limited capacity are unable to diversify their portfolio. Over the past few years, mutual funds popularity has increased significantly as a viable and desired investment option among investors all over world. The phenomenal growth of mutual funds in developed countries reveals investor’s preference for this kind of investment and has led to the creation of a diverse variety of mutual funds (Huhmann, 2005)
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