Performance of fixed-income mutual funds with regime-switching models

Mohamed A. Ayadi, Skander Lazrak, Yusui Liao and Robert Welch

The Quarterly Review of Economics and Finance, 2018, vol. 69, issue C, 217-231

Abstract: We use Markovian regime-switching models to assess the performance of Canadian fixed-income mutual funds from 1980 to 2011. Fund returns are well described by two distinct volatility related bull and bear regimes. While the selection performance of Canadian fixed-income funds is negative, it is regime dependent and deteriorates during recessions. We also find mixed results on the timing ability of fund managers with poor performance for Canadian inflation protected fixed-income funds, Canadian long-term fixed-income funds, and Canadian money market funds groups. Finally, we show that a multivariate regime-switching model is superior to univariate models given the dynamic market conditions and the fund portfolios’ cross-correlations.

Keywords: Performance evaluation; Markovian regime-switching models; Selection and timing abilities; Fixed-income mutual funds (search for similar items in EconPapers)
JEL-codes: C24 C34 G12 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:69:y:2018:i:c:p:217-231

DOI: 10.1016/j.qref.2018.03.005

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