Estimating Performance Aspects of Greek Equity Funds with a Liquidity-Augmented Factor Model
37 Pages Posted: 3 Dec 2011
Date Written: December 3, 2011
The present study, employing a survivorship-bias free data-set, assesses the performance of Greek domestic equity funds during the period June 2001-December 2009 controlling for the thin trading risk that is inherent in the Greek stock market. Augmenting Carhart’s multi benchmark model (1997) with a stock–level liquidity factor we document the absence of skills among domestic equity fund managers. However, at a fund level, we detect evidence of a statistically and economically significant out-performance that might be related to a conjectured incentive effect. In a second stage analysis, we examine the relationship between fund performance and a series of cost and operational attributes employing the robust quantile regression method. Cross sectional results demonstrate a significant inverse relationship between fund performance and expenses. Moreover, our findings show that the larger the fund the lower the performance.
Keywords: Mutual funds, multi-factor models, liquidity, incentive effect, quantile regression
JEL Classification: G14, G15, G21, G23
Suggested Citation: Suggested Citation