Journal of Finance and Accounting
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Journal of Finance and Accounting. 2016, 4(1), 11-19
DOI: 10.12691/jfa-4-1-2
Open AccessArticle

Can Mutual Funds Outguess the Market: Evidence from Bangladesh?

Md. Bokhtiar Hasan1, and A. F. M. Mainul Ahsan2

1Department of Finance and Banking, Islamic University, Kushtia, Bangladesh

2Department of Accounting and Corporate Governance, Macquarie University, Sydney, Australia

Pub. Date: November 17, 2016

Cite this paper:
Md. Bokhtiar Hasan and A. F. M. Mainul Ahsan. Can Mutual Funds Outguess the Market: Evidence from Bangladesh?. Journal of Finance and Accounting. 2016; 4(1):11-19. doi: 10.12691/jfa-4-1-2

Abstract

This study principally analyzes the fund managers’ ability to outguess the market in Bangladesh. We perform the investigation on weekly data of 25 mutual funds for the period of May 16, 2010 to April 28, 2016. To serve our objective, we tested both selection and market timing skills of the fund managers. We have used six measures; average return, Sharpe ratio, Treynor ratio, Information ratio, Jensen’s alpha and M square; to confirm the selection skill of fund managers and found no selection skill persistent to most of the fund managers (excluding Aims 1st M.F, ICB AMCL 2nd NRB M.F. and 6th ICB M.F.). In addition, the negative values of alpha indicate that fund managers become not only failed to add value to their portfolio, but also pool wrong assets which hurt the return resulting negative profit. On the other hand, we have employed two popular methodologies; Treynor and Mazuy [24] and Henriksson and Merton [10]; to test the market timing skill of fund managers and found no market timing skill persistent to the fund managers. Thus, with a little exception, we can conclude that fund managers have no ability to outguess the market in Bangladesh.

Keywords:
mutual funds NAV market timing selectivity fund performance

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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