Impact on the rankings of mutual funds due to choice of performance measure: An Asian perspective

Nagar, Vinu and Gupta, Rakesh and Krishnamurti, Chandrasekhar (2013) Impact on the rankings of mutual funds due to choice of performance measure: An Asian perspective. European Journal of Economics, Finance and Administrative Sciences (61). pp. 154-169. ISSN 1450-2275

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Existing literature on performance evaluation has used wide variety of performance measures to estimate the risk-return benefits of a portfolio. This has raised questions about the reliability and accuracy of the performance measures. Investors are also concerned whether the choice of a performance measure has an impact on their investment decisions. This paper attempts to resolve this issue by comparing eight risk-adjusted and downside risk-adjusted performance measures using a sample of open-ended equity mutual funds of India, Singapore and Taiwan. We estimate the performance measures by creating a moving window of time and perform Spearman’s rank correlation on them. Results show that performance measures that fall in the same category, for example Value-at-Risk (VaR) based measures, are highly correlated to each other, but as we go further and use performance measures that are different from each other, rank correlations decrease. In our study, rank correlations for Sortino ratio are significantly lower for Singapore and Taiwan markets. Therefore, we conclude that the choice of performance measure is significant as it affects the rankings of mutual funds.

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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Copyright of Accepted Manuscripts—Authors of accepted manuscripts for publication in the journal agree that the copyright will be transferred to journal and all authors should sign copyright forms. However, those authors have the right to use of their published manuscripts fairly, such as teaching and nonprofit purposes.
Faculty / Department / School: Current - Faculty of Business, Education, Law and Arts - School of Commerce
Date Deposited: 23 Apr 2014 09:38
Last Modified: 14 Sep 2017 22:56
Uncontrolled Keywords: mutual funds, performance evaluation, rank correlation, risk-adjusted performance measures, downside risk-adjusted performance measures
Fields of Research : 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
Socio-Economic Objective: E Expanding Knowledge > 97 Expanding Knowledge > 970115 Expanding Knowledge in Commerce, Management, Tourism and Services

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