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The cross section of conditional mutual fund performance in European stock markets

Author

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  • Banegas, Ayelen
  • Gillen, Ben
  • Timmermann, Allan
  • Wermers, Russ

Abstract

This paper implements strategies that use macroeconomic variables to select European equity mutual funds, including Pan-European, country, and sector funds. We find that several macro-variables are useful in locating funds with future outperformance and that country-specific mutual funds provide the best opportunities for fund rotation strategies using macroeconomic information. Specifically, our baseline long-only strategies that exploit time-varying predictability provide four-factor alphas of 12–13% per year over the 1993–2008 period. Our study provides new evidence on the skills of local versus Pan-European asset managers, as well as how macroeconomic information can be used to locate and time these local fund manager skills.

Suggested Citation

  • Banegas, Ayelen & Gillen, Ben & Timmermann, Allan & Wermers, Russ, 2013. "The cross section of conditional mutual fund performance in European stock markets," Journal of Financial Economics, Elsevier, vol. 108(3), pages 699-726.
    • Handle: RePEc:eee:jfinec:v:108:y:2013:i:3:p:699-726
    DOI: 10.1016/j.jfineco.2013.01.008
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    More about this item

    Keywords

    European equity markets; Mutual fund performance; Time-varying investment opportunities;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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