Document Type : Research Paper

Authors

• Milad Badiei ¹
• Mohammad Hassan Ebrahimi Sarve Oliya ²
• Mostafa Sargolzaei ²

¹ Master of Financial Engineering and risk management,, Department of Finance and Banking, Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran

² Department of Finance and Banking, Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran

Abstract

Investigating the performance of mutual funds with a wide range of capital market audiences including retail investors, pension funds and institutional investors who invest in them with various goals such as receiving cash returns, portfolio diversification and risk management is one of the challenging issues in the finance field. is considered The purpose of this research is to investigate the risk-adjusted performance of mutual funds using the Fama and French three-factor model and to determine the explanatory power of the capital market performance and debt market performance by redefining the benchmark rate according to the investment portfolio of each fund. For this purpose, the data related to 59 mutual investment funds during the period of 116 months from April 2012 to November 2022 were analyzed using multivariate linear regression and the generalized least squares method. The results of the research show the significant explanatory power of the market performance, the significant and positive effect of excess market return and the size portfolio return, as well as the non-significant positive effect of the value portfolio return on the risk-adjusted performance of mutual funds. Based on this, one unit change in the market's excess return causes a change of 0.99 unit in the excess return of mutual funds, which shows the high diversification of the fund's portfolio. Also, one unit of change in the return of size portfolio also causes a change of 0.07 unit in the excess return of mutual funds, which indicates the acquisition of excess return of funds by investing in small stocks. Other findings of the research include the high correlation between the excess return of mutual funds and the excess return of the market and obtaining higher rewards for the similar risk of the researched funds compared to the market.

Keywords

• Benchmark rate
• Fama and French three-factor model
• Generalized least squares
• Mutual funds
• Risk-adjusted performance

Main Subjects

• Financial Economics