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Malaysian unit trust funds’ performance during up and down market conditions A comparison of market benchmark

Malaysian unit trust funds’ performance during up and down market conditions A comparison of... Purpose – The paper seeks to examine whether selectivity and timing performance of fund manager is sensitive to the choice of market benchmarks. The two benchmarks used are the Kuala Lumpur Composite Index (KLCI) and the Exchange Main Board All‐Share (EMAS) Index. Design/methodology/approach – The paper seeks to employed Jensen's model to estimate the overall fund performance and Henriksson and Merton's model to separate the fund manager's investment performance into the selectivity and market‐timing components. Findings – The findings indicate that, on average, the funds display negative overall performance with either the KLCI or the EMAS Index. In addition, there is little variation in the manager's market‐timing and selectivity performance across alternative market benchmarks. It is also reported that a manager's poor timing ability contributes significantly to the fund's negative overall performance. Research limitations/implications – The paper employed just two market benchmarks. Inclusion of more market benchmarks in future research may provide further support for the existing findings. Practical implications – Regardless of the market benchmarks used, the results imply that fund managers should seriously reassess their market timing efforts, given that their predictions are very often in the wrong direction than in the right direction. Such findings suggest that no economic benefit accrues to the average fund manager involved in market‐timing activities. Originality/value – The paper provides first evidence on the sensitivity of a fund manager's separate investment components (timing and selectivity) to different specification of the market benchmarks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

Malaysian unit trust funds’ performance during up and down market conditions A comparison of market benchmark

Soo‐Wah Low
Managerial Finance , Volume 33 (2): 13 – Jan 23, 2007
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References (52)

Publisher
Emerald Publishing
Copyright
Copyright © 2007 Emerald Group Publishing Limited. All rights reserved.
ISSN
0307-4358
DOI
10.1108/03074350710715863
Publisher site
See Article on Publisher Site

Abstract

Purpose – The paper seeks to examine whether selectivity and timing performance of fund manager is sensitive to the choice of market benchmarks. The two benchmarks used are the Kuala Lumpur Composite Index (KLCI) and the Exchange Main Board All‐Share (EMAS) Index. Design/methodology/approach – The paper seeks to employed Jensen's model to estimate the overall fund performance and Henriksson and Merton's model to separate the fund manager's investment performance into the selectivity and market‐timing components. Findings – The findings indicate that, on average, the funds display negative overall performance with either the KLCI or the EMAS Index. In addition, there is little variation in the manager's market‐timing and selectivity performance across alternative market benchmarks. It is also reported that a manager's poor timing ability contributes significantly to the fund's negative overall performance. Research limitations/implications – The paper employed just two market benchmarks. Inclusion of more market benchmarks in future research may provide further support for the existing findings. Practical implications – Regardless of the market benchmarks used, the results imply that fund managers should seriously reassess their market timing efforts, given that their predictions are very often in the wrong direction than in the right direction. Such findings suggest that no economic benefit accrues to the average fund manager involved in market‐timing activities. Originality/value – The paper provides first evidence on the sensitivity of a fund manager's separate investment components (timing and selectivity) to different specification of the market benchmarks.

Journal

Managerial Finance – Emerald Publishing

Published: Jan 23, 2007

Keywords: Unit trusts; Fund management benchmarking; Securities; Market outing; Malaysia

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