IDEAS home Printed from https://ideas.repec.org/a/vrs/jecman/v38y2019i4p107-128n3.html
   My bibliography  Save this article

The efficiency of an investing in investment funds in the context of a longevity

Author

Listed:
  • Mościbrodzka Monika

    (Department of Statistics and Operations Research, Faculty of Law, Administration and Economics, University of Wroclaw, Wroclaw, Poland)

  • Homa Magdalena

    (Department of Statistics and Operations Research, Faculty of Law, Administration and Economics, University of Wroclaw, Poland)

Abstract

Aim/purpose – The aim of this paper is to evaluate the efficiency of an investing in investment funds with different risk levels in times of a future life expectancy increase. For this purpose, it was analysed how future prices of the investment funds’ entities behave, depending on the window function and the age of the investors, in particular people of retirement age, for whom an investment income may be a supplementary way of raising additional capital. Design/methodology/approach – Based on the historical data of the funds chosen from the different risk groups, a simulation of their price behaviour in the window function was carried out covering investor’s further life expectancy. Then, based on the result, the distribution of prices was analysed and the efficiency of investing in investment funds according to risk exposure was evaluated. Findings – According to the conducted analyses, the funds with the lowest efficiency were share funds. The best funds, in terms of efficiency, were bond and money funds. Research implications/limitations – The study was conducted on a limited number of funds, but this analysis can help take investment decisions. Originality/value/contribution – In this study, the investment in investment funds is treated as a long-term project which expires after 25-30 years, and therefore it may be problematic to use standard methods of evaluation for the purpose of this paper. As a result, the NPV (Net Present Value) method was applied as a measure of the investment’s efficiency. In the literature, this approach to the evaluation of investment funds is unique.

Suggested Citation

  • Mościbrodzka Monika & Homa Magdalena, 2019. "The efficiency of an investing in investment funds in the context of a longevity," Journal of Economics and Management, Sciendo, vol. 38(4), pages 107-128, December.
    • Handle: RePEc:vrs:jecman:v:38:y:2019:i:4:p:107-128:n:3
    DOI: 10.22367/jem.2019.38.06
    as

    Download full text from publisher

    File URL: https://doi.org/10.22367/jem.2019.38.06
    Download Restriction: no
    File URL: https://libkey.io/10.22367/jem.2019.38.06?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kon, Stanley J & Jen, Frank C, 1979. "The Investment Performance of Mutual Funds: An Empirical Investigation of Timing, Selectivity, and Market Efficiency," The Journal of Business, University of Chicago Press, vol. 52(2), pages 263-289, April.
    2. Grinblatt, Mark & Titman, Sheridan D, 1989. "Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings," The Journal of Business, University of Chicago Press, vol. 62(3), pages 393-416, July.
    3. Mossin, Jan, 1969. "Security Pricing and Investment Criteria in Competitive Markets," American Economic Review, American Economic Association, vol. 59(5), pages 749-756, December.
    4. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    5. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Babalos, Vassilios & Caporale, Guglielmo Maria & Philippas, Nikolaos, 2012. "Efficiency evaluation of Greek equity funds," Research in International Business and Finance, Elsevier, vol. 26(2), pages 317-333.
    2. Luis Ferruz & Luis Vicente & Laura Andreu, 2009. "Performance persistence and its influence on money and investor flows into Spanish pension plans," Review of Quantitative Finance and Accounting, Springer, vol. 32(1), pages 85-100, January.
    3. Karagiannidis, Iordanis & Vozlyublennaia, Nadia, 2016. "Limits to mutual funds' ability to rely on mean/variance optimization," Journal of Empirical Finance, Elsevier, vol. 37(C), pages 282-292.
    4. Matallin-Saez Juan Carlos, 2008. "The Dynamics of Mutual Funds and Market Timing Measurement," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 12(4), pages 1-37, December.
    5. Mohammad Reza TAVAKOLI BAGHDADABAD & Afsaneh NOORI HOUSHYAR, 2014. "Productivity and Efficiency Evaluation of US Mutual Funds," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(2), pages 120-143, March.
    6. Capocci, Daniel & Hubner, Georges, 2004. "Analysis of hedge fund performance," Journal of Empirical Finance, Elsevier, vol. 11(1), pages 55-89, January.
    7. Luis Vicente & Luis Ferruz, 2005. "Performance persistence in Spanish equity funds," Applied Financial Economics, Taylor & Francis Journals, vol. 15(18), pages 1305-1313.
    8. Catarina Alexandra Neves Proença & Maria Elisabete Duarte Neves & Maria Castelo Baptista Gouveia & Mara Teresa Silva Madaleno, 2023. "Technological, healthcare and consumer funds efficiency: influence of COVID-19," Operational Research, Springer, vol. 23(2), pages 1-42, June.
    9. Pendaraki, K. & Zopounidis, C. & Doumpos, M., 2005. "On the construction of mutual fund portfolios: A multicriteria methodology and an application to the Greek market of equity mutual funds," European Journal of Operational Research, Elsevier, vol. 163(2), pages 462-481, June.
    10. Ferson, Wayne & Mo, Haitao, 2016. "Performance measurement with selectivity, market and volatility timing," Journal of Financial Economics, Elsevier, vol. 121(1), pages 93-110.
    11. Ferson, Wayne E., 2013. "Investment Performance: A Review and Synthesis," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 969-1010, Elsevier.
    12. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    13. Muhammad Kashif & Thomas Leirvik, 2022. "The MAX Effect in an Oil Exporting Country: The Case of Norway," JRFM, MDPI, vol. 15(4), pages 1-16, March.
    14. David A. Volkman, 1999. "Market Volatility And Perverse Timing Performance Of Mutual Fund Managers," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(4), pages 449-470, December.
    15. Agarwal, Vikas & Gay, Gerald D. & Ling, Leng, 2011. "Window dressing in mutual funds," CFR Working Papers 11-07, University of Cologne, Centre for Financial Research (CFR).
    16. Turan G. Bali & Robert F. Engle & Yi Tang, 2017. "Dynamic Conditional Beta Is Alive and Well in the Cross Section of Daily Stock Returns," Management Science, INFORMS, vol. 63(11), pages 3760-3779, November.
    17. Dimitrios G. Konstantinides & Georgios C. Zachos, 2019. "Exhibiting Abnormal Returns Under a Risk Averse Strategy," Methodology and Computing in Applied Probability, Springer, vol. 21(2), pages 551-566, June.
    18. Cakici, Nusret & Zaremba, Adam, 2022. "Salience theory and the cross-section of stock returns: International and further evidence," Journal of Financial Economics, Elsevier, vol. 146(2), pages 689-725.
    19. Bradrania, Reza & Veron, Jose Francisco, 2023. "The beta anomaly in the Australian stock market and the lottery demand," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    20. Kobana Abukari & Isaac Otchere, 2020. "Dominance of hybrid contratum strategies over momentum and contrarian strategies: half a century of evidence," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 34(4), pages 471-505, December.

    More about this item

    Keywords

    efficiency; longevity; investment funds; simulation methods;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:jecman:v:38:y:2019:i:4:p:107-128:n:3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.