Will the winner still be the winner? A study of equity mutual fund performance in Indonesia
Abstract
In this study, we explore the consistency of Indonesian Rupiah (IDR) – denominated equity mutual funds offered in Indonesia from 2007 to 2017 from various holding periods, namely one year, three years, and five years. Two questions are addressed. Will the winning mutual funds be the winner in the following period? Is the performance of a longer period more persistent than that of the shorter period? Using the nominal return from these eleven years, we find that the equity mutual funds in Indonesia earn no stable performance. The winner will not always be the winner in the following observed period. In addition, no evidence is found that long-term performance would result in a better persistence than that of the shorter time frame.
Keyword : equity mutual fund, performance consistency, Indonesia
How to Cite
Frensidy, B., Nainggolan, R., & Robiyanto, R. (2020). Will the winner still be the winner? A study of equity mutual fund performance in Indonesia. Business: Theory and Practice, 21(2), 566-577. https://doi.org/10.3846/btp.2020.11553
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Filip, D. (2018). The impact of fund attributes on performance: Empirical evidence for Polish equity funds. Zbornik radova Ekonomskog fakulteta u Rijeci, 36(2), 465–488.
Fortin, R., & Michelson, S. (2010). Mutual fund performance persistence: still true? Academy of Accounting and Financial Studies Journal, 14(4), 29–41.
Frensidy, B. (2016). The performance of undiversified portfolio In Indonesia stock exchange. Journal of Applied Business Research, 32(4), 1041–1048. https://doi.org/10.19030/jabr.v32i4.9720
Frensidy, B., Utama, S., & Prijadi, R. (2017). An analysis of diversification practice of domestic individual investors in the Indonesia stock exchange. International Journal of Applied Business and Economic Research, 15(19), 137–148.
Glode, V. (2011). Why mutual funds “underperform”. Journal of Financial Economics, 99(3), 546–559. https://doi.org/10.1016/j.jfineco.2010.10.008
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Hanke, B., Keswani, A., Quigley, G., & Zagonov, M. (2018). Survivorship bias and comparability of UK open-ended fund databases. Economics Letters, 172, 110–114. https://doi.org/10.1016/j.econlet.2018.08.027
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Nguyen, A.-N., Shahid, M. S., & Kernohan, D. (2018). Investor confidence and mutual fund performance in emerging markets. Journal of Economic Studies, 45(6), 1288–1310. https://doi.org/10.1108/JES-07-2017-0175
Pangestuti, I. R. D., Wahyudi, S., & Robiyanto, R. (2017). Performance evaluation of equity mutual funds in Indonesia period of 2012–2014. Jurnal Keuangan dan Perbankan, 21(4), 527–542. https://doi.org/10.26905/jkdp.v21i4.1503
Rao, Z.-u.-R., Tauni, M. Z., Iqbal, A., & Umar, M. (2017). Emerging market mutual fund performance: evidence for China. Journal of Asia Business Studies, 11(2), 167–187. https://doi.org/10.1108/JABS-10-2015-0176
Robiyanto, R., Santoso, M. A., & Ernayani, R. (2019). Sharia mutual funds performance in Indonesia. Business: Theory and Practice, 20, 11–18. https://doi.org/10.3846/btp.2019.02
Robiyanto, R., Wahyudi, S., & Pangestuti, I. R. D. (2017). The volatility–variability hypotheses testing and hedging effectiveness of precious metals for the Indonesian and Malaysian capital markets. Gadjah Mada International Journal of Business, 19(2), 167–192. https://doi.org/10.22146/gamaijb.26260
Rodriguez, J., & Joseph McCarthy, P. (2015). Are micro-cap mutual funds indeed riskier? Review of Accounting and Finance, 14(4), 352–362. https://doi.org/10.1108/RAF-03-2015-0045
Shive, S., & Yun, H. (2013). Are mutual funds sitting ducks? Journal of Financial Economics, 107(1), 220–237. https://doi.org/10.1016/j.jfineco.2012.08.012
Treynor, J. L. (2012). Can mutual funds outguess the market?: A report on the performance of 57 funds and their sensitivity to market fluctuations. In J. L. Treynor (Ed.), Treynor on Institutional Investing (pp. 88–96). John Wiley & Sons, Inc. https://doi.org/10.1002/9781119196679
Turtle, H. J., & Zhang, C. (2012). Time-varying performance of international mutual funds. Journal of Empirical Finance, 19(3), 334–348. https://doi.org/10.1016/j.jempfin.2012.03.003
Vidal-García, J. (2013). The persistence of European mutual fund performance. Research in International Business and Finance, 28, 45–67. https://doi.org/10.1016/j.ribaf.2012.09.004
Vidal-García, J., Vidal, M., Boubaker, S., & Uddin, G. S. (2016). The short-term persistence of international mutual fund performance. Economic Modelling, 52, 926–938. https://doi.org/10.1016/j.econmod.2015.10.031
Wattanatorn, W., Padungsaksawasdi, C., Chunhachinda, P., & Nathaphan, S. (2020). Mutual fund liquidity timing ability in the higher moment framework. Research in International Business and Finance, 51. https://doi.org/10.1016/j.ribaf.2019.101105
Widodo, W., & Robiyanto, R. (2018). Equity mutual fund performance: the case of Indonesia. UTCC International Journal of Business and Economics (UTCC IJBE), 10(3), 19–36.
Zulkafli, A. H., Ahmad, Z., & Muttaqin, E. E (2017). The performance of socially responsible investments in Indonesia: a study of the Sri Kehati Index (SKI). Gadjah Mada International Journal of Business, 19(1), 59–76. https://doi.org/10.22146/gamaijb.17959
Antonakakis, N., Chang, T., Cunado, J., & Gupta, R. (2018). The relationship between commodity markets and commodity mutual funds: A wavelet-based analysis. Finance Research Letters, 24, 1–9. https://doi.org/10.1016/j.frl.2017.03.005
Babalos, V., Mamatzakis, E. C., & Matousek, R. (2015). The performance of US equity mutual funds. Journal of Banking & Finance, 52, 217–229. https://doi.org/10.1016/j.jbankfin.2014.12.008
Christiansen, C., Grønborg, N. S., & Nielsen, O. L. (2020). Mutual fund selection for realistically short samples. Journal of Empirical Finance, 55, 218–240. https://doi.org/10.1016/j.jempfin.2019.12.001
Deb, S. G. (2019). Persistence in performance of actively managed equity mutual funds: New Indian evidence. IIMB Management Review, 31(2), 145–156. https://doi.org/10.1016/j.iimb.2019.03.014
Devaney, M., Morillon, T., & Weber, W. (2016). Mutual fund efficiency and tradeoffs in the production of risk and return. Managerial Finance, 42(3), 225–243. https://doi.org/10.1108/MF-05-2015-0142
Dumitrescu, A., & Gil-Bazo, J. (2018). Market frictions, investor sophistication, and persistence in mutual fund performance. Journal of Financial Markets, 40, 40–59. https://doi.org/10.1016/j.finmar.2018.01.001
Fama, E. F., & French, K. R. (2010). Luck versus skill in the cross-section of mutual fund returns. Journal of Finance, 65(5), 1915–1947. https://doi.org/10.1111/j.1540-6261.2010.01598.x
Fan, Y., & Addams, H. L. (2012). United States-based international mutual funds: performance and persistence. Financial Services Review, 21(1), 51–61.
Filip, D. (2018). The impact of fund attributes on performance: Empirical evidence for Polish equity funds. Zbornik radova Ekonomskog fakulteta u Rijeci, 36(2), 465–488.
Fortin, R., & Michelson, S. (2010). Mutual fund performance persistence: still true? Academy of Accounting and Financial Studies Journal, 14(4), 29–41.
Frensidy, B. (2016). The performance of undiversified portfolio In Indonesia stock exchange. Journal of Applied Business Research, 32(4), 1041–1048. https://doi.org/10.19030/jabr.v32i4.9720
Frensidy, B., Utama, S., & Prijadi, R. (2017). An analysis of diversification practice of domestic individual investors in the Indonesia stock exchange. International Journal of Applied Business and Economic Research, 15(19), 137–148.
Glode, V. (2011). Why mutual funds “underperform”. Journal of Financial Economics, 99(3), 546–559. https://doi.org/10.1016/j.jfineco.2010.10.008
Grau-Carles, P., Doncel, L. M., & Sainz, J. (2018). Stability in mutual fund performance rankings: A new proposal. International Review of Economics & Finance, 61, 337–346. https://doi.org/10.1016/j.iref.2018.01.018
Hanke, B., Keswani, A., Quigley, G., & Zagonov, M. (2018). Survivorship bias and comparability of UK open-ended fund databases. Economics Letters, 172, 110–114. https://doi.org/10.1016/j.econlet.2018.08.027
Ibbotson, R. G., & Kaplan, P. D. (2000). Does asset‐allocation policy explain 40 percent, 90 percent, or 100 percent of performance? Financial Analyst Journal, 56, 26–33. https://doi.org/10.2469/faj.v56.n1.2327
Jeon, H., Kang, J., & Lee, C. (2017). Precision about manager skill, mutual fund flows, and performance persistence. The North American Journal of Economics and Finance, 40, 222–237. https://doi.org/10.1016/j.najef.2017.03.002
Kiymaz, H., & Simsek, K. D. (2017). The performance of US-based emerging market mutual funds. Journal of Capital Markets Studies, 1(1), 58–73. https://doi.org/10.1108/JCMS-10-2017-003
Kourtis, A. (2016). The Sharpe ratio of estimated efficient portfolios. Finance Research Letters, 17, 72–78. https://doi.org/10.1016/j.frl.2016.01.009
Matallín-Sáez, J. C., Soler-Domínguez, A., & Tortosa-Ausina, E. (2016). On the robustness of persistence in mutual fund performance. The North American Journal of Economics and Finance, 36, 192–231. https://doi.org/10.1016/j.najef.2016.01.002
Matallín-Sáez, J. C., Soler-Domínguez, A., Tortosa-Ausina, E., & de Mingo-López, D. V. (2019). Ethical strategy focus and mutual fund management: Performance and persistence. Journal of Cleaner Production, 213, 618–633. https://doi.org/10.1016/j.jclepro.2018.12.130
Nguyen, A.-N., Shahid, M. S., & Kernohan, D. (2018). Investor confidence and mutual fund performance in emerging markets. Journal of Economic Studies, 45(6), 1288–1310. https://doi.org/10.1108/JES-07-2017-0175
Pangestuti, I. R. D., Wahyudi, S., & Robiyanto, R. (2017). Performance evaluation of equity mutual funds in Indonesia period of 2012–2014. Jurnal Keuangan dan Perbankan, 21(4), 527–542. https://doi.org/10.26905/jkdp.v21i4.1503
Rao, Z.-u.-R., Tauni, M. Z., Iqbal, A., & Umar, M. (2017). Emerging market mutual fund performance: evidence for China. Journal of Asia Business Studies, 11(2), 167–187. https://doi.org/10.1108/JABS-10-2015-0176
Robiyanto, R., Santoso, M. A., & Ernayani, R. (2019). Sharia mutual funds performance in Indonesia. Business: Theory and Practice, 20, 11–18. https://doi.org/10.3846/btp.2019.02
Robiyanto, R., Wahyudi, S., & Pangestuti, I. R. D. (2017). The volatility–variability hypotheses testing and hedging effectiveness of precious metals for the Indonesian and Malaysian capital markets. Gadjah Mada International Journal of Business, 19(2), 167–192. https://doi.org/10.22146/gamaijb.26260
Rodriguez, J., & Joseph McCarthy, P. (2015). Are micro-cap mutual funds indeed riskier? Review of Accounting and Finance, 14(4), 352–362. https://doi.org/10.1108/RAF-03-2015-0045
Shive, S., & Yun, H. (2013). Are mutual funds sitting ducks? Journal of Financial Economics, 107(1), 220–237. https://doi.org/10.1016/j.jfineco.2012.08.012
Treynor, J. L. (2012). Can mutual funds outguess the market?: A report on the performance of 57 funds and their sensitivity to market fluctuations. In J. L. Treynor (Ed.), Treynor on Institutional Investing (pp. 88–96). John Wiley & Sons, Inc. https://doi.org/10.1002/9781119196679
Turtle, H. J., & Zhang, C. (2012). Time-varying performance of international mutual funds. Journal of Empirical Finance, 19(3), 334–348. https://doi.org/10.1016/j.jempfin.2012.03.003
Vidal-García, J. (2013). The persistence of European mutual fund performance. Research in International Business and Finance, 28, 45–67. https://doi.org/10.1016/j.ribaf.2012.09.004
Vidal-García, J., Vidal, M., Boubaker, S., & Uddin, G. S. (2016). The short-term persistence of international mutual fund performance. Economic Modelling, 52, 926–938. https://doi.org/10.1016/j.econmod.2015.10.031
Wattanatorn, W., Padungsaksawasdi, C., Chunhachinda, P., & Nathaphan, S. (2020). Mutual fund liquidity timing ability in the higher moment framework. Research in International Business and Finance, 51. https://doi.org/10.1016/j.ribaf.2019.101105
Widodo, W., & Robiyanto, R. (2018). Equity mutual fund performance: the case of Indonesia. UTCC International Journal of Business and Economics (UTCC IJBE), 10(3), 19–36.
Zulkafli, A. H., Ahmad, Z., & Muttaqin, E. E (2017). The performance of socially responsible investments in Indonesia: a study of the Sri Kehati Index (SKI). Gadjah Mada International Journal of Business, 19(1), 59–76. https://doi.org/10.22146/gamaijb.17959