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Performance attribution of mutual funds in India: outperformance or mis‐representation?

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  • Gaurav Singh Chauhan

Abstract

We conduct a novel holdings‐based performance attribution, particularly suited to emerging markets, for equity‐oriented active mutual funds in India. Although, we find significantly positive alphas for an average fund, the stated benchmarks are grossly mis‐specified. A style‐adjusted benchmark could beat the stated benchmarks by greater margins than the funds themselves. While funds’ trading activity consistently adds value, cash drag and market timing usually diminish value. Although, the best‐performing funds exhibit superior security selection abilities, their outperformance does not persist. However, despite the lack of persistence winner funds continue to generate significantly higher alphas than loser funds for quite some time.

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  • Gaurav Singh Chauhan, 2019. "Performance attribution of mutual funds in India: outperformance or mis‐representation?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(S1), pages 383-409, April.
    • Handle: RePEc:bla:acctfi:v:59:y:2019:i:s1:p:383-409
    DOI: 10.1111/acfi.12463
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    References listed on IDEAS

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