Abstract
This paper is in pursuit of analyzing and elongating prior research on the performance evaluation of mutual funds by a comparative analysis with three categories of 82 Saudi equity funds during 2011 to 2016 using Fama’s decomposition model. The paper also made an attempt to explore the relationship with the risk reward ratio to the relative performance measure in predicting the future performance of the Saudi equity fund returns. The empirical results show that Saudi local equity funds perform better followed by Arabian and international/global equity funds in terms of expected signs and diagnostic tests.
Highlights
Asset and wealth management industry has long played a prominent role in the sphere of Saudi Arabian financial market
The primary focus of this study is to evaluate the performance of the Saudi equity funds listed on Tadawul Stock Exchange using Fama decomposition measures
The empirical results shows that Saudi equity funds – local perform better followed by Arabian and international/global equity funds
Summary
Asset and wealth management industry has long played a prominent role in the sphere of Saudi Arabian financial market. As a regional leader and center of mutual fund activity, Saudi Arabia is the largest fund domicile in the GCC and the second largest in the Middle East and North Africa (MENA) region, accounting for USD 26.2 billion of the USD 79.6 billion MENA fund market as of mid-2015, according to Zawya. According to EY GCC wealth and asset management report 2015, as of July 2015, GCC mutual fund market accounted for USD 36 billion in assets, across 375 funds, the major contributor Saudi Arabia accounts for 80% of the total. The present research study focused on analyzing the performance of equity funds – local, equity funds – international and equity funds – Arabian for being the reason of high concentration and the type of funds that primarily invest in equities
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