Abstract
In this study, we explore the consistency of Indonesian Rupiah (IDR) – denominated equity mutual funds offered in Indonesia from 2007 to 2017 from various holding periods, namely one year, three years, and five years. Two questions are addressed. Will the winning mutual funds be the winner in the following period? Is the performance of a longer period more persistent than that of the shorter period? Using the nominal return from these eleven years, we find that the equity mutual funds in Indonesia earn no stable performance. The winner will not always be the winner in the following observed period. In addition, no evidence is found that long-term performance would result in a better persistence than that of the shorter time frame.
Highlights
The preference to invest in equity mutual fund in Indonesia is increasing
Based on data from Indonesia Financial Services Authority (OJK), the asset under management (AUM) of Rupiah (IDR)-denominated equity funds offered in Indonesia has grown 242.1% from IDR37.7 trillion in year-end 2007 to IDR128.9 trillion in year-end 2017
Individual investors can choose to invest in equity fund, not directly in stock market, because the fund manager is considered better trained on timing and stock selection (Angelidis et al, 2013; Frensidy, 2016; Glode, 2011; Grau-Carles et al, 2018; Rao et al, 2017; Robiyanto et al, 2019; Turtle & Zhang, 2012)
Summary
The preference to invest in equity mutual fund (later will be stated as equity fund) in Indonesia is increasing. Individual investors can choose to invest in equity fund, not directly in stock market, because the fund manager is considered better trained on timing and stock selection (Angelidis et al, 2013; Frensidy, 2016; Glode, 2011; Grau-Carles et al, 2018; Rao et al, 2017; Robiyanto et al, 2019; Turtle & Zhang, 2012). The prevailing regulation regarding equity fund says the proportion of stocks in each equity fund should be at least 80% (the other proportion could be cash or money market instruments) Both direct and indirect investing eventually have a similar fundamental exposure, namely volatility of the stock market (systematic risk)
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