Carhart and Q-Factor Views of Mutual Fund Performance
Pandangan Carhart dan Faktor Q terhadap Prestasi Dana Amanah

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

ruzitaar@ukm.edu.my

Faculty of Business and Accounting
Infrastructure University Kuala Lumpur
Unipark Suria, Jalan Ikram-Uniten
43000 Kajang, Selangor, MALAYSIA.

rafidah@iukl.edu.my

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

lingpicksoon@gmail.com

Abstract

This study evaluates the performances of 321 Malaysian equity mutual funds for the period of June 1998 to May 2015. These mutual funds appear to generate an average monthly rate of 0.6878 percent (8.25% per annum), a performance close enough to that of the market (8.42% per annum). The Jensen’s alphas show that only around 22 percent of these funds significantly outperform the market. While multifactor models are expected to produce better explanatory power, Carhart rather than q-factor model seems to fit the Malaysian funds data better. The results reveal that (i) funds’ returns are closely linked to market performance, (ii) effect of fund managers’ stock selection and market timing skills are both weak and insignificant on fund performance, (iii) of the five investment styles exhibited in these multifactor models, only value (HML) and profitability (RMW) have gained attention from fund managers, (iv) adoption of RMW tend to give an equal chance of deteriorating and improving funds’ returns. The results of this study in general imply that investors might be better off investing in the equity market directly and passively through index-tracking and buy-and-hold strategies that are less costly.

Keywords

Carhart model; investment styles; Jensen’s alpha; market timing; multifactor model; Mutual funds; q-factor model; stock selection
https://doi.org/10.17576/pengurusan-2018-51-22

Citation

Abdul Rahim, R., Othman, R., & Pick Soon, L. (2017). Carhart and Q-Factor Views of Mutual Fund Performance. Jurnal Pengurusan, 51, 261–271. https://doi.org/10.17576/pengurusan-2018-51-22

@article{rahim2017carhart,
  title={Carhart and Q-Factor Views of Mutual Fund Performance},
  author={Abdul Rahim, Ruzita and Othman, Rafidah and Pick Soon, Ling},
  journal={Jurnal Pengurusan},
 

volume={51},
  number={},
  pages={261—271},
  year={2017},
  doi={https://doi.org/10.17576/pengurusan-2018-51-22},
  publisher={Penerbit UKM},
}

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51 (2017) 261 – 271

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