The Cross-Section of Conditional Mutual Fund Performance in European Stock Markets
Posted: 23 Mar 2011 Last revised: 5 Sep 2012
Date Written: September 3, 2012
This paper implements strategies that use macroeconomic variables to select European equity mutual funds, including Pan-European, country, and sector funds. We find that several macro variables are useful in locating funds with future outperformance, and that country-specific mutual funds provide the best opportunities for fund rotation strategies using macroeconomic information. Specifically, our baseline long-only strategies that exploit time-varying predictability provide four-factor alphas of 12-13%/year over the 1993-2008 period. Our study provides new evidence on the skills of local versus Pan-European asset managers, as well as how macroeconomic information can be used to locate and time these local fund manager skills.
Keywords: European equity markets, mutual fund performance, time-varying investment opportunities
JEL Classification: G11, G15, G23
Suggested Citation: Suggested Citation