How does oil market volatility impact mutual fund performance?

Bader Jawid Alsubaiei, Giovanni Calice and Andrew Vivian

International Review of Economics & Finance, 2024, vol. 89, issue PA, 1601-1621

Abstract: The aim of this paper is twofold. First, we investigate whether oil market volatility affects fund performance. Second, we examine whether oil volatility impacts fund managers' ability to select stocks and to time oil volatility. Our analysis is based on the Saudi Arabian market, a major developing economy and the world's largest oil producer. Our first main finding is that oil market volatility has a significant negative impact on mutual fund performance. Notably, this result holds robustly across all the volatility and performance measures applied in our analysis. Secondly, the risk-adjusted performance evidence suggests that high oil volatility reduces managers' stock selection ability. Further empirical analysis is consistent with the notion that skilled mutual funds are able to consistently generate alpha but evidence is mixed on whether they can improve performance by timing oil market volatility. Our study presents new evidence on a fast-growing emerging market and identifies important practical implications for the mutual fund industry which help investors, academics and regulators to better understand the functioning of this market.

Keywords: Mutual fund; Fund performance; Oil volatility; Abnormal return; Saudi Arabia (search for similar items in EconPapers)
JEL-codes: G10 G11 G15 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:89:y:2024:i:pa:p:1601-1621

DOI: 10.1016/j.iref.2023.08.023

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