Performance Base Empirical Analysis of Mutual Fund of Nepal

Tara Prasad Upadhyaya,Sirjana Chhetri

doi:10.4236/jfrm.2019.82004

Abstract

The paper analyzes the returns earned by the sample mutual funds benchmarking with market return. It also assesses whether they are taking advantages of diversification, market timing and selectivity of securities to their investors. Secondary data of eight sample mutual funds’ have been used from 2015 to 2018 published by Nepal Stock Exchange and respective fund manager. Risk adjusted performance measures Jensen alpha, Treynor ratio and Sharpe ratio have been used to analyze return in terms of risk and Co-efficient of Determination (R2), Quadratic Regression of Treynor and Mazuy and Famade composition model are employed to assess diversification, market timing and selectivity ability of fund manager. The result explores that funds that are operated from 36 months over-perform benchmark market index and those funds operated for 16 months are suffering from very low return. Further evidence shows that low amount of diversification, moderate level of selectivity and no significant relationship between timing skill and return of funds.

Highlights

A Mutual Fund is an investment vehicle that pools funds from various investors and invests the funds in stocks, bonds, short-term money-market instruments, other securities or assets or some combination of these investments
The result explores that funds that are operated from 36 months over-perform benchmark market index and those funds operated for 16 months are suffering from very low return
The specific objectives is to measure the return earned by sample mutual funds benchmarking with market return in terms of different risk and to assess the mutual fund schemes offering the advantages of diversification, market timing and selectivity of securities to their investors

Summary

Introduction

A Mutual Fund is an investment vehicle that pools funds from various investors and invests the funds in stocks, bonds, short-term money-market instruments, other securities or assets or some combination of these investments. Very few research has been completed regarding the mutual fund performance in Nepal. The specific objectives is to measure the return earned by sample mutual funds benchmarking with market return in terms of different risk and to assess the mutual fund schemes offering the advantages of diversification, market timing and selectivity of securities to their investors. The performance of mutual fund in terms risk adjusted return, diversification, market timing and selectivity ability are analyzed by using diverse technical measurement methods. This paper deals with the performance evaluation of 8 mutual funds in terms risk adjusted return, diversification, market timing and selectivity ability and it has been structured as Section 1: Introduction, Section 2: Review of literature, and Section 3: Methodology and Data Analysis

Review of Literature

Methodology and Data Analysis

Conclusion