Mutual Fund Performance in Bull and Bear Market: The Case of Pakistani Mutual Fund

2280 WordsJun 25, 201810 Pages
Chapter 2 Overview of the Mutual Funds in Pakistan 2.1 History of Mutual Fund There are main two types of mutual funds are available open end and closed end funds for the Pakistani investors. Close End mutual funds are traded in stock exchange, directly every investor can buy or sell these funds in the stock market. Prices of these funds are determined on the basis of demand and supply of the shares rather than net assets value in case of closed end mutual funds. In 1962, Government of the Pakistan established open end mutual fund with the name of National Investment Unit Trust (NITL) commonly known as NIT. Later, first closed end mutual fund in Pakistan was established in the year 1967 with the name of Investment Corporation of…show more content…
Francis and Fabozzi (1979) find that fund manager of the mutual funds do not reduce the beta of fund in bear market and increase it in bull market in order to earn high risk adjustment returns for the shareholders and mutual funds managers do not shift over the beta of funds to take high return of market movements. McDonald (1974 ) indicates that stated objectives are significantly related to subsequent measure of systematic risk and total variability and to realize mean excess returns. During the discussed period more aggressive objectives generally produced better performance of the funds when we find out the ratios of mean return to beta or mean return to total variability. Higher risk funds usually appeared to produce better return to risk performance than lower risks funds. Madden, Nunn and Wiemann (1986) show that the alpha for the small capitalization mutual funds is positive and significantly different from zero on consistent basis, while the capital of mutual funds is not significant for the largest mutual funds. The overall results provide strong support for consistent and significant inverse relation between performance of the mutual funds and the size of market. Malkiel (1995) conclude that mutual funds not provide any clarification to keep a faith that securities markets are extremely efficient. Most of the investor keep in mind the purchasing a low expense index fund than give

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