Using downside risk in evaluating the performance of Malaysian mutual funds

Mohammad Reza Tavakoli Baghdadabad and Masood Fooladi

International Journal of Emerging Markets, 2015, vol. 10, issue 3, 427-447

Abstract: Purpose - – The purpose of this paper is to provide the modified measures of risk-adjusted performance evaluation of Malaysian mutual funds using the downside risk concepts, and promote the ability of managers and investors in making logical decisions under the market asymmetry condition. Design/methodology/approach - – This study focusses on the performance evaluation of Malaysian mutual funds using eight modified measures of Sharpe, Treynor,M2, Jensen’sα, information ratio (IR), MSR, SPI, and leverage factor. These modified measures use the downside systematic risk and semi-standard deviation instead of systematic risk and conventional standard deviation, respectively, to evaluate the performance of Malaysian mutual funds over the period 2000-2011. Findings - – The results indicate that the conventional measures of performance evaluation do not have a crucial influence on the relative evaluation of mutual funds. Three modified measures of Sharpe, Treynor, andM2 have a high correlation with the conventional Sharpe measure and can be used instead of the conventional Sharpe measure. Since, two modified measures of Treynor andM2 display a high rank correlation coefficient with the conventional Treynor measure, they can be replaced with this traditional measure. In addition, two modified IR and MSR measures along with the modified SPI and conventional SPI show very high rank correlation coefficients in relation to each other. The results also document a modified leverage factor less than one for all funds. It can be concluded that the strategy of un-levering the investor’s holding must be followed. Practical implications - – The empirical evidence of this study can be utilized as inputs in the process of decision-making by different types of investors who are interested in participating especially in Malaysian stock market and generally in global stock market under the market asymmetry condition. Originality/value - – The contribution of this study is to modify five measures ofM2, IR, MSR, FPI, and leverage factor in the downside risk framework which is a work on a rather under-researched area.

Keywords: Downside β; Semi-variance; Mutual fund; Downside risk (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-08-2011-0071

DOI: 10.1108/IJoEM-08-2011-0071

Access Statistics for this article

International Journal of Emerging Markets is currently edited by Prof Ilan Alon

More articles in International Journal of Emerging Markets from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().