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Estimation of interest rates’ impact on mutual funds’ performance in the USA

Author

Listed:
  • Artamonov, Nikita

    (MGIMO University, Moscow, Russian Federation)

  • Voronina, Anna

    (Eurasian Economic Commission, Moscow, Russian Federation)

  • Emelyanov, Nikita

    (Sistema-capital, Moscow, Russian Federation)

  • Kurbatskii, Aleksei

    (Moscow School of Economics, Lomonosov Moscow State University, Moscow, Russian Federation)

Abstract

The article examines the impact of US government Treasury bonds yield on the return of mutual funds relative to the respective benchmark. The sample includes 376 American funds over 12 years of observations from 2006 to 2017 using data from Bloomberg and the highly specialized CRSP database. Panel data model with fixed individual effects was constructed in which the dependent variable is the so-called tracking error, obtained as the difference between the return of the Fund and the return of the benchmark. The explanatory variables are a number of micro-variables and the yield of government bonds. It turns out that the yield of US government bonds is a significant factor for the mutual funds “alpha”, which in practice should allow them to hedge against the risk of underperformance.

Suggested Citation

  • Artamonov, Nikita & Voronina, Anna & Emelyanov, Nikita & Kurbatskii, Aleksei, 2020. "Estimation of interest rates’ impact on mutual funds’ performance in the USA," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 58, pages 55-75.
    • Handle: RePEc:ris:apltrx:0394
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    mutual funds; S&P500 index; tracking error; government bond yields;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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