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Performance persistence and style consistency of Indian fixed income mutual funds – A longitudinal study

Mayank Patel, Vinodh Madhavan, Supratim Das Gupta and Satish Kumar
Authors registered in the RePEc Author Service: Satish Kumar and Satish Kumar

International Review of Financial Analysis, 2023, vol. 86, issue C

Abstract: In this study, we evaluate the performance of Indian fixed-income mutual funds using a comprehensive sample over a ten-year period from April 2010 to March 2020. We examine performance persistence of 190 fixed income funds across 16 fund categories and analyze investment style of the most persistent and top performing funds. We assess performance persistence using recursive portfolio formation test, and analyze investment style using Sharpe's (1992) asset class factor model supplemented with Lobosco and diBartolomeo (1997) approach for statistical robustness. We also study the correlation between performance persistence and style consistency and find persistent funds to be less consistent in style. Our findings indicate that a substantial proportion (73%) of the funds considered were under-performers. Our results pertaining to style analysis indicate substantial drift in investment style from regulator-mandated investment objectives. Further, the study nudges regulators to revisit the prevailing practice of fund classification based on Macaulay's duration. In light of the growing prominence of Indian fixed income securities, the findings of this study are all the more pertinent to investors, asset management companies and policy makers.

Keywords: Mutual funds; Performance evaluation; Performance persistence; Style analysis; Style consistency (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:86:y:2023:i:c:s1057521923000510

DOI: 10.1016/j.irfa.2023.102535

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