The use of derivatives in the Spanish mutual fund industry

Jose Marin () and Thomas A. Rangel

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We study the use of derivatives in the Spanish mutual fund industry. The picture that emerges from our analysis is rather negative. In general, the use of derivatives does not improve the performance of the funds. In only one out of eight categories we find some (very weak and not robust) evidence of superior performance. In most of the cases users significantly underperform non users. Furthermore, users do not seem to exhibit superior timing or selectivity skills either, but rather the contrary. This bad performance is only partially explained by the larger fees funds using derivatives charge. Moreover, we do not find evidence of derivatives being used for hedging purposes. We do find evidence of derivatives being used for speculation. But users in only one category exhibit skills as speculators. Finally, we find evidence of derivatives being used to manage the funds’ cash inflows and outflows more efficiently.

Keywords: Mutual Funds; Derivative use; Risk Management (search for similar items in EconPapers)
JEL-codes: G11 G2 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-eec and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: The use of derivatives in the spanish mutual fund industry (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:990

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