â€ŽPERFORMANCE OF ISRAELI MUTUAL FUNDS: â€ŽEQUITY AND BOND FUNDS
Menachem Abudy (),
Moshe Barel () and
Avi Wohl ()
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Moshe Barel: Tel Aviv University
Avi Wohl: Tel Aviv University
Israel Economic Review, 2016, vol. 13, issue 1, 1-21
This paper examines the performance of mutual funds in Israel between 2003 and 2008. â€ŽAlmost all of the funds active during all or part of this period were examined. (The following funds were not included in the sample: â€Žmoney market funds, tracking funds, Israeli funds of funds, foreign funds of funds, and â€œtaxable funds".) â€ŽThe fundsâ€™ performances were examined by comparing them to benchmarks which were built using regressions of the fundsâ€™ yields as compared with: â€Žthe CPI-Indexed Government Bonds Index; the Government Shekel Bonds Index; the CPI-Indexed Corporate Bonds Index; the General Shares Index; the MSCI World Index, and the shekel return on dollar-linked interest investments. â€ŽThe funds were grouped according to their classifications into three investment categories, all of which showed annualized underperformance: government bonds â€“ -2.08 percent; corporate bonds â€“ -3.35 percent; non-bond (mostly share) funds â€“ -3.62 percent. â€ŽSuch underperformance, which is statistically significant, was also found when the period was divided into sub-periods. â€ŽThe main reason for the underperformance is the management fees charged by the funds, although underperformance was found even before deducting management fees: â€Žgovernment bonds â€“ -0.69 percent; corporate bonds â€“ -1.72 percent; non-bond (mainly share) funds â€“ -1.00 percent. â€ŽThe underperformance before deducting management fees (gross) is not statistically significant. â€ŽThese calculations were made using a simple averaging of fund yields in each investment category. â€ŽThe weighting of the yields according to the funds' market capitalization does not materially change the results. â€ŽIt was found that there is a persistence that is not high in the performance of mutual funds by fund managerâ€”every 1 percent of excess yield between 2003 and 2005 explains about 0.28 percent of the excess yield between 2006 and 2008.
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Persistent link: https://EconPapers.repec.org/RePEc:boi:isrerv:v:13:y:2016:i:1:p:1-21
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