Time-Varying Fund Performance Measurement and Its Application

Shin, Jung Cheol; Cheong, Mun Kyung; Hwang, Jeong Wook

Korean Journal of Financial Studies 2015;44(1):93-126.
Published online February 28, 2015.

Jung Cheol Shin, Mun Kyung Cheong, Jeong Wook Hwang

경제상황에 따른 펀드의 성과평가 및 그 활용방안 연구

신중철, 정문경, 황정욱

Abstract

Widely used mutual fund performance evaluation measures by Jensen (1968), Fama and French (1993), and Carhart (1997) are risk-adjusted measures assuming that alpha can be achieved regardless of the economic situations such as recessions or expansions. On the other hand, Kacperczyk, Nieuwerburgh and Veldkamp (2014) developed a performance evaluation measure (KNV measure) that captures the fund manager skills during the recessions and expansions. In this study, we utilize KNV measure to evaluate performance of publicly traded domestic mutual funds. First, we find that there are significant differences between risk-adjusted returns of domestic mutual funds in recessions and those in expansions. Market timing skill is more relevant during recessions whereas stock selection skill is during expansions. Second, we find that performance differences between superior funds and inferior funds are persistent over a 12-month period. Also, the combined performance measure including the market timing and stock selection is significant in selecting superior fund managers. Finally, we find no evidence that the same fund managers who show superior stock selection skill during expansions also do superior market timing skill during recessions. Such a finding is different from the study of Kacperczyk, Nieuwerburgh and Veldkamp (2014).

Key Words: 경기변동,공모펀드,마켓타이밍,운용능력,종목선택,Economic Cycle,Fund Manager Skill,Market Timing,Publicly Traded Mutual Funds,Stock Selection