Active versus Passive Management of International Mutual Funds ...

More documents

Recommendations

Info

22 ratio for the passively managed Hang Seng Index and the actively managed Equity Asia Pacific Investment Category. H6 0 : For the 1995 to 2008 periods, there is no significant difference between the mean Sharpe ratio for the passively managed S&P/ASX Index and the actively managed Equity Asia Pacific Investment Category. H6 a : For the 1995 to 2008 periods, there is a significant difference between the mean Sharpe ratio for the passively managed S&P/ASX Index and the actively managed Equity Asia Pacific Investment Category. Table 2. Hypothesis-Methodology Hypothesis Test Methodology H1 0 Equity Europe versus Dow Jones EURO STOXX F-test two sample for 50 variance H2 0 Equity Europe versus FTSE 100 F-test two sample for variance H3 0 Equity Europe versus DAX F-test two sample for variance H4 0 Equity Asia Pacific versus Nikkei 225 F-test two sample for variance H5 0 Equity Asia Pacific versus Hang Seng F-test two sample for variance H6 0 Equity Asia Pacific versus S&P/ASX F-test two sample for variance Data analysis methods Data analysis was conducted using statistical analyses and hypothesis testing. The F-test Two Sample for Variances was used to test for significant differences between the population means of passive indices and active investment categories as identified in Table 2 [64]. ANALYSIS AND PRESENTATION OF FINDINGS The following details the results and findings of the study’s hypotheses tests based on the data extracted from the Morningstar Direct Database and thereby addresses the study’s research question. The findings of the research are presented in the order in which the hypotheses have been stated. The research question for the study was: During the 1995-2008 time periods which management style, active or passive, produced the best international mutual fund performance on a risk adjusted basis Equity Europe Morningstar investment category Hypothesis 1 H1 0 : For the 1995 to 2008 periods, there is no significant difference between the mean Sharpe ratio for the passively managed Dow Jones EURO STOXX 50 Index and the actively managed Equity Europe Investment Category. H1 a : For the 1995 to 2008 periods, there is a significant difference between the mean Sharpe ratio for the passively managed Dow Jones EURO STOXX 50 Index and the actively managed Equity Europe Investment Category. Weekly Sharpe ratios were calculated from daily data for the Dow Jones EURO STOXX 50 Index and Morningstar Equity Europe Investment Category for the period January 1, 1995- December 31, 2008 with 731 periods. Appendix B presents a side-by-side comparison of the
23 indices’ weekly Sharpe ratios. Table 3 below shows the F-test two-sample for variances result. The 2.541 F-value for the Morningstar Equity Europe Investment Category is more than the 1.130 F-critical one-tail value, therefore the null hypothesis is rejected. Furthermore, the 1.73569E-35 p-value is less than the assumed .05 level of significance (alpha); another indication the null hypothesis is rejected. Table 3. F-Test Two Sample for Variances of Sharpe Ratios for Morningstar Equity Europe Investment Category versus Dow Jones EURO STOXX 50 Index Variables Equity Europe Investment Category Dow Jones EURO STOXX 50 Mean 0.193265287 0.084527473 Variance 0.909860845 0.358045535 Observations 731 731 Df 730 730 F 2.541187522 1.1295 P(F
Page 1 and 2: Active versus Passive Management of
Page 3 and 4: suspect that anomalies would disapp
Page 5 and 6: investors [6]. Siegel [79] added to
Page 7 and 8: Portfolio performance measures Trey
Page 9 and 10: hypothetical portfolios as a means
Page 11 and 12: covered funds from 1992 to 1996 and
Page 13 and 14: where anomalies continue to exist.
Page 15 and 16: means someone sold their position.
Page 17 and 18: called the Noisy Market Hypothesis.
Page 19 and 20: 19 indices, Morgan Stanley Capital
Page 21: б i = the standard deviation of th
Page 25 and 26: 25 (alpha); a further indication th
Page 27 and 28: tend to outperform active managers
Page 29 and 30: 02/27/1995 -0.655 ‐0.268 ‐0.156
Page 31 and 32: 10/21/1996 ‐0.989 ‐0.383 ‐0.2
Page 33 and 34: 06/15/1998 ‐0.225 ‐0.170 ‐0.0
Page 35 and 36: 02/07/2000 0.810 0.183 0.010 0.204
Page 37 and 38: 10/01/2001 0.473 0.123 0.287 0.380
Page 39 and 40: 05/26/2003 0.568 0.782 0.329 0.908
Page 41 and 42: 01/17/2005 0.149 ‐0.131 ‐0.208
Page 43 and 44: 09/11/2006 0.468 0.511 ‐0.054 0.9
Page 45 and 46: 45 05/05/2008 ‐0.072 ‐0.508 ‐
Page 47 and 48: 10/16/1995 ‐1.952 0.430 0.006 0.2
Page 49 and 50: 05/12/1997 1.006 0.498 0.169 0.912
Page 51 and 52: 12/07/1998 0.350 ‐0.220 ‐0.001
Page 53 and 54: 07/03/2000 ‐0.041 ‐0.034 0.857
Page 55 and 56: 01/28/2002 ‐0.173 ‐0.505 ‐0.0
Page 57 and 58: 08/25/2003 0.118 0.159 0.338 0.450
Page 59 and 60: 03/21/2005 ‐0.583 ‐0.508 ‐0.6
Page 61 and 62: 10/16/2006 0.583 0.311 0.245 10/23/
Page 63 and 64: 63 05/12/2008 1.075 1.218 0.506 1.0
Page 65 and 66: 25. Cremers, M., & Petajisto, A. (2
Page 67: 63(6), 31-37. 68. Reilly, F. K., &

Active versus Passive Management of International Mutual Funds ...

Create successful ePaper yourself

Delete template?

Save as template?