The performance of active Finnish equity mutual funds from 2010 to 2019
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School of Business |
Bachelor's thesis
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Author
Date
2020
Department
Major/Subject
Mcode
Degree programme
(Mikkeli) Bachelor’s Program in International Business
Language
en
Pages
33 + 2
Series
Abstract
Objectives The main objectives of this study were analyzing the performance of active Finnish equity mutual funds over the sample time period of 2010 to 2019 and finding strong correlations between excess returns and fund characteristics in order to see what makes an active mutual fund overperform its competition. Also, the persistence of the funds is evaluated and interpreted. Summary Active mutual funds have been a major investment vehicle for retail investors for a long time, but the emergence of low-cost index funds and exchange traded funds have posed a challenge whether the substantially higher management expenses for active management are justified with excess returns over the benchmark index generated by superior fund managers. The literature suggests a consensus of underperformance overall net of expenses with regional deviation. Conclusions Active Finnish equity mutual funds were able to overperform the market, with clear excess returns in markets that are generally view less effective, supporting the efficient market hypothesis. European and global funds had negative alphas net of expenses. Statistically significant positive correlation was found between Sharpe ratio and alpha. There is little evidence of mutual fund persistence on a year-to-year basis, with more persistence in poor performance, supporting prior literature.Description
Thesis advisor
Stepanov, RomanKeywords
active management, mutual fund, regression, benchmark index, persistence, efficient market hypothesis, Sharpe ratio
