Abstract
Mutual Fund is a choice of investment for the small investors to invest
in capital market through skillful professional management. The
research paper attempts to validate the Capital Asset Pricing Model
and Fama French 3-Factors Model and their preferred suitability in
measuring and evaluating the mutual fund performance in Pakistan.
The month wise data of one hundred open ended Pakistani mutual
funds for the period from 2009 to 2015 is analyzed by both models.
The Capital Asset Pricing Model showed significance results for all the
portfolios; however the intercepts of this model were found increasing
in size, showing poor performance for the high performance portfolios.
The Fama French 3-factors model demonstrated poor results for two
factors i.e. fund size and fund value, however the market factor showed
significant coefficients for all the portfolios. The Gibbon Ross Shanken
test was applied to find the best model between the two competing
models. This test results revealed that Capital Asset Pricing Model is
the preferred model between the two competing models.
Alam Rehman, Qadar Bakhsh Baloch. (2016) Evaluating Pakistan’s Mutual Fund Performance: Validating through CAPM and Fama French 3-Factor Model, Journal of Managerial Sciences, Volume 10, Issue 1.
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