George Comer

Hybrid Mutual Funds and Market Timing Performance

I examine the stock market timing ability of two samples of hybrid mutual funds. I find that the inclusion of bond indices and a bond timing variable in a multifactor Treynor-Mazuy model framework leads to substantially different conclusions concerning the stock market timing performance of these funds relative to the traditional Treynor-Mazuy model. Results from the multifactor Treynor-Mazuy model find less stock timing ability over the 1981–91 time period and provide evidence of significant stock timing ability across the second fund sample during the 1992–2000 time period.

Measuring the value of active fund management

Purpose - The purpose of this paper is to examine the value of active fund management using a sample of hybrid mutual funds. Design/methodology/approach - Instead of using traditional risk-adjusted measures, the paper employs an alternative attribution return methodology where the actual monthly fund return is compared to the return that would have been earned by the indexing strategy that best reflects the funds prior month allocation. Value is measured by defining a funds attribution return as the difference between a funds actual month Findings - It is found that hybrid funds as a group do not add value and that this underperformance does not appear to be driven by the poor performance of non-surviving funds. However, these funds perform significantly better than the style benchmark under weak vs strong stock market conditions. This performance difference between bull and bear market conditions suggests some hedge fund-like downside protection that may offer a reason why investors choose these funds despite the funds’ average underperformance and despite their higher costs relative to index funds. Originality/value - The contribution of this paper is twofold. First, it concentrates on hybrid mutual funds, which despite a surge in their interest over the last five years have attracted very little academic study. Second, in the implementation of its non-traditional performance measure, it employed daily fund returns, stock market indices and bond market indices as opposed to the monthly or quarterly data used in other related studies.

International Mutual Funds: MSCI Benchmarks and Portfolio Evaluation

We examine the sensitivity of estimates of abnormal performance to models that vary in the degree to which they explicitly control for variation in the regional and emerging market allocations of diversified international mutual funds. Models based on the most commonly used global MSCI benchmarks indicate that the funds have average positive abnormal performance. This positive performance is driven by funds with the greatest emerging markets and Pacific region exposure. When we measure performance against a model which includes MSCI benchmarks for the U.S, Europe, Pacific region, and Emerging Markets, average fund performance turns negative and significant.

Stock Selection Skill, Manager Flexibility, and Performance: Evidence from Unit Investment Trusts

Unlike mutual funds, unit investment trusts invest in a fixed portfolio of stocks for a predetermined period of time and hold limited cash positions. Thus, UITs provide an ideal sample to measure stock selection skill. We examine a sample of 1487 UITs over the period 2004 to 2013. We find that UITs generate significant negative alphas indicating poor stock selection skills. We compare the UITs to actively managed mutual funds characterized by high turnover ratios and high cash holdings. The UITs significantly underperform both groups of mutual funds suggesting that restricting flexibility and maintaining full investment in the market does not result in better risk adjusted performance.