Market crises and benchmark-adjusted fund alphas in a small market context
Autor(a) principal: | |
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Data de Publicação: | 2023 |
Outros Autores: | , , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/11110/2752 https://doi.org/Lopes, F., Leite, P., Correia, M.C., & Durán-Santomil, P. (2023). Market crises and benchmark-adjusted fund alphas in a small market context. Revista Galega de Economía, 32(3), 1-17. https://doi.org/10.15304/rge.32.3.9140 |
Resumo: | Most mutual fund performance evaluation studies interpret fund alphas as the incremental performance of managers in relation to passive benchmark indices, which should exhibit statistically insignificant alphas. However, if these indices present significant non-zero alphas, standard (non-adjusted) fund alphas are biased. This paper investigates the impact of using benchmark-adjusted alphas to assess the performance of Portuguese-based mutual funds, investing in domestic and European equities. For the period 2000-2020, our results show that fund benchmarks exhibit significantly negative alphas, which lead to an underestimation of mutual fund performance when employing standard models. As a result, benchmark-adjusted alphas are significantly higher than unadjusted alphas for both fund categories, though the differences are larger for domestic than for European funds. We have also found that the impact of the benchmark-adjustment procedure depends on the state of markets. The domestic (European) benchmark exhibits considerably lower (higher) alphas during crisis than during non-crisis periods. During market crises, the differences between pre- and post-adjustment alphas are statistically significant only for domestic funds, whereas during non-crisis periods, both fund categories exhibit significant performance improvements. Our findings suggest that the benchmark-adjustment procedure has a higher impact when benchmark indices exhibit higher concentration. |
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Market crises and benchmark-adjusted fund alphas in a small market contextMutual fund performanceBenchmark-adjusted alphasMarket crisesMultifactor modelsMost mutual fund performance evaluation studies interpret fund alphas as the incremental performance of managers in relation to passive benchmark indices, which should exhibit statistically insignificant alphas. However, if these indices present significant non-zero alphas, standard (non-adjusted) fund alphas are biased. This paper investigates the impact of using benchmark-adjusted alphas to assess the performance of Portuguese-based mutual funds, investing in domestic and European equities. For the period 2000-2020, our results show that fund benchmarks exhibit significantly negative alphas, which lead to an underestimation of mutual fund performance when employing standard models. As a result, benchmark-adjusted alphas are significantly higher than unadjusted alphas for both fund categories, though the differences are larger for domestic than for European funds. We have also found that the impact of the benchmark-adjustment procedure depends on the state of markets. The domestic (European) benchmark exhibits considerably lower (higher) alphas during crisis than during non-crisis periods. During market crises, the differences between pre- and post-adjustment alphas are statistically significant only for domestic funds, whereas during non-crisis periods, both fund categories exhibit significant performance improvements. Our findings suggest that the benchmark-adjustment procedure has a higher impact when benchmark indices exhibit higher concentration.Revista Galega de Economía2023-11-07T10:23:48Z2023-11-072023-10-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articlehttp://hdl.handle.net/11110/2752https://doi.org/Lopes, F., Leite, P., Correia, M.C., & Durán-Santomil, P. (2023). Market crises and benchmark-adjusted fund alphas in a small market context. Revista Galega de Economía, 32(3), 1-17. https://doi.org/10.15304/rge.32.3.9140http://hdl.handle.net/11110/2752engLopes, FernandoLeite, PauloCorreia, Maria CarmoDurán-Santomil, Pabloinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T05:13:41Zoai:ciencipca.ipca.pt:11110/2752Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:10:02.563485Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Market crises and benchmark-adjusted fund alphas in a small market context |
title |
Market crises and benchmark-adjusted fund alphas in a small market context |
spellingShingle |
Market crises and benchmark-adjusted fund alphas in a small market context Lopes, Fernando Mutual fund performance Benchmark-adjusted alphas Market crises Multifactor models |
title_short |
Market crises and benchmark-adjusted fund alphas in a small market context |
title_full |
Market crises and benchmark-adjusted fund alphas in a small market context |
title_fullStr |
Market crises and benchmark-adjusted fund alphas in a small market context |
title_full_unstemmed |
Market crises and benchmark-adjusted fund alphas in a small market context |
title_sort |
Market crises and benchmark-adjusted fund alphas in a small market context |
author |
Lopes, Fernando |
author_facet |
Lopes, Fernando Leite, Paulo Correia, Maria Carmo Durán-Santomil, Pablo |
author_role |
author |
author2 |
Leite, Paulo Correia, Maria Carmo Durán-Santomil, Pablo |
author2_role |
author author author |
dc.contributor.author.fl_str_mv |
Lopes, Fernando Leite, Paulo Correia, Maria Carmo Durán-Santomil, Pablo |
dc.subject.por.fl_str_mv |
Mutual fund performance Benchmark-adjusted alphas Market crises Multifactor models |
topic |
Mutual fund performance Benchmark-adjusted alphas Market crises Multifactor models |
description |
Most mutual fund performance evaluation studies interpret fund alphas as the incremental performance of managers in relation to passive benchmark indices, which should exhibit statistically insignificant alphas. However, if these indices present significant non-zero alphas, standard (non-adjusted) fund alphas are biased. This paper investigates the impact of using benchmark-adjusted alphas to assess the performance of Portuguese-based mutual funds, investing in domestic and European equities. For the period 2000-2020, our results show that fund benchmarks exhibit significantly negative alphas, which lead to an underestimation of mutual fund performance when employing standard models. As a result, benchmark-adjusted alphas are significantly higher than unadjusted alphas for both fund categories, though the differences are larger for domestic than for European funds. We have also found that the impact of the benchmark-adjustment procedure depends on the state of markets. The domestic (European) benchmark exhibits considerably lower (higher) alphas during crisis than during non-crisis periods. During market crises, the differences between pre- and post-adjustment alphas are statistically significant only for domestic funds, whereas during non-crisis periods, both fund categories exhibit significant performance improvements. Our findings suggest that the benchmark-adjustment procedure has a higher impact when benchmark indices exhibit higher concentration. |
publishDate |
2023 |
dc.date.none.fl_str_mv |
2023-11-07T10:23:48Z 2023-11-07 2023-10-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/11110/2752 https://doi.org/Lopes, F., Leite, P., Correia, M.C., & Durán-Santomil, P. (2023). Market crises and benchmark-adjusted fund alphas in a small market context. Revista Galega de Economía, 32(3), 1-17. https://doi.org/10.15304/rge.32.3.9140 http://hdl.handle.net/11110/2752 |
url |
http://hdl.handle.net/11110/2752 https://doi.org/Lopes, F., Leite, P., Correia, M.C., & Durán-Santomil, P. (2023). Market crises and benchmark-adjusted fund alphas in a small market context. Revista Galega de Economía, 32(3), 1-17. https://doi.org/10.15304/rge.32.3.9140 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.publisher.none.fl_str_mv |
Revista Galega de Economía |
publisher.none.fl_str_mv |
Revista Galega de Economía |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
repository.mail.fl_str_mv |
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1799134654951849984 |