Fund Performance Measurement Without Benchmark - A Case of Select Indian Mutual Funds

Abstract:     
This paper calculates the Performance Change measure (PCM) developed by Grinblatt & Titman (Journal of Business, 1993, vol. 66, no. 1)for a sample of 50 Indian mutual funds over a period of 26 months. PCM as a measure has some advantages compared to the traditional measures, the most important one being - it is free from using a benchmark portfolio and consequently the resulting biases arising out of usage of such a portfolio. So by using PCM as a measure, this paper, without using any benchmark, attempts to asses whether the selected mutual funds are able to provide above-normal return on average - using no more information than what is available to the common investor. PCM has been calculated for one month, one quarter, and one year lag. And using PCM as a measure the study finds that though in the short term, the mutual funds were unable to generate above-normal return but on the average the combined PCM of all the mutual funds is significantly different from zero, which are in agreement with the original findings of Grinblatt & Titman, in this Indian context.

Keywords: Performance Measurement, Mutual Funds, Benchmark

Working Paper Series