| Equity Funds` Performance and Its Persistence in the Presence of Market-Dependent Systematic Risk: Smooth Transition Regression Approach |
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Yeon Jeong Ha, Kwang Soo Ko |
| 주식시장 상황에 따른 주식형 펀드의 성과와 성과 지속성 |
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하연정, 고광수 |
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| Abstract |
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This study examines the determinants of equity funds` performance and its persistence in the presence of market-dependent systematic risk: stock selection or market timing ability? We fail to find any evidence of stock selection or market timing ability that is against market efficiency. We use the traditional HM (Henriksson and Merton) model and the smooth transition regression (STR) model to study equity funds` performance and its persistence. We find the following results: First, the approach of portfolio formation is an alternative to resolve the negative correlation problem between stock selection and market timing measures in the HM model. Second, market timing ability is a major determinant of equity fund performance when we examine portfolio performance on the basis of 3, 6, 9, and 12 month rebalancing frequencies. Third, when we artificially make the highest performing portfolio, its systematic risk of beta moves smoothly according to market risk premium. That is, if market risk premium is rising (declining), the beta of the highest performing portfolio is moving upward (downward) smoothly, The longer the portfolio rebalancing period, the stronger the effect of smoothing beta. Fourth, the persistence of portfolio performance is not found at all in any rebalancing period. This study concludes the lack of stock selection and market timing abilities in the Korean equity funds` performance. |
| Key Words:
효율적 시장,Efficient Market,Market-Dependent Beta,Persistence of Fund Performance,Stock Selection Ability,Timing Ability,펀드 성과 지속성,종목 선택 능력,시장 의존 베타,시장 예측 능력 |
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