International Mutual Fund Performance and Political Risk

Barrie A. Bailey, Jean L. Heck () and Kathryn A. Wilkens
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Barrie A. Bailey: Monmouth University, USA
Jean L. Heck: Dept. of Finance, Villanova University, Villanova, PA 19085, USA
Kathryn A. Wilkens: Worcester Polytechnic Institute, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2005, vol. 08, issue 01, 167-184

Abstract: Recent years have witnessed phenomenal growth in both the number and size of US based international equity mutual funds. While the benefits of international diversification are well documented in the literature, empirical research relating to the performance of international mutual funds has been limited and contradictory. The purpose of this study is to examine the impact of political risk on the risk-adjusted returns of international mutual funds using a modified event study methodology. More specifically, the dummy variable event study methodology using portfolios rather than individual funds is used. This methodology addresses the problems of multiple event days and calendar clustering. The macro political risk event of interest is the Iraqi invasion of Kuwait. Results of the study suggest that shareholders of international equity mutual funds earn significant abnormal returns in the face of political turmoil.

Keywords: Mutual funds; international; political risk; Middle East (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (7)

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DOI: 10.1142/S0219091505000312

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