Mutual Fund Return Predictability in Partially Segmented Markets

77 Pages Posted: 23 Mar 2009 Last revised: 22 Oct 2011

See all articles by Ayelen Banegas

Ayelen Banegas

Board of Governors of the Federal Reserve System

Benjamin J. Gillen

Claremont McKenna College - Robert Day School of Economics and Finance

Allan Timmermann

UCSD ; Centre for Economic Policy Research (CEPR)

Russ Wermers

University of Maryland - Robert H. Smith School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 6, 2011

Abstract

This paper studies the predictability of European equity mutual fund performance during a period when European stock markets were partially segmented. Speci fically, we use macroeconomic variables to predict the performance of European equity funds, including Pan-European, country, and sector funds. We find that macro-variables are useful in locating funds with future outperformance, and that country-specifi c mutual funds provide the best opportunities for fund rotation strategies using macroeconomic information. Speci fically, our baseline long-only strategies provide four-factor alphas of 10-12%/year over the 1993-2008 period. Our study provides new evidence on the bene fits of local asset managers in segmented markets, as well as how macroeconomic information can be used to locate and exploit these bene fits.

Keywords: European equity markets; mutual fund performance; time-varying investment opportunities.

JEL Classification: G11, G15, G23

Suggested Citation

Banegas, Ayelen and Gillen, Benjamin J. and Timmermann, Allan and Wermers, Russell R., Mutual Fund Return Predictability in Partially Segmented Markets (October 6, 2011). Available at SSRN: https://ssrn.com/abstract=1364762 or http://dx.doi.org/10.2139/ssrn.1364762

Ayelen Banegas

Board of Governors of the Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
United States

Benjamin J. Gillen

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States

Allan Timmermann (Contact Author)

UCSD ( email )

9500 Gilman Drive
La Jolla, CA 92093-0553
United States
858-534-0894 (Phone)

HOME PAGE: http://rady.ucsd.edu/people/faculty/timmermann/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Russell R. Wermers

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/rwermers/

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