Performance of Foreign and Global Mutual Funds: The Role of Security Selection, Region‐Shifting, and Style‐Shifting Abilities

29 Pages Posted: 26 Oct 2015

See all articles by Hui‐Ju Tsai

Hui‐Ju Tsai

Washington College

Yangru Wu

Rutgers University, Newark - School of Business - Department of Finance & Economics

Date Written: November 2015

Abstract

We examine the performance of U.S.‐based foreign and global funds after controlling for their regional and style exposure. We show that, on average, the total performance (TP) and security selection abilities of both foreign and global funds are significantly negative and exhibit short‐term predictability. Additionally, R2 reflects funds’ security selection abilities, consistent with previous findings for domestic mutual funds. Investors can earn higher abnormal returns and TP in the short run by purchasing past winners with low R2 than by purchasing past losers with high R2. However, there is no evidence of predictability in the funds' region‐shifting and style‐shifting abilities.

Keywords: global and foreign funds, performance persistence, region‐shifting abilities, style‐shifting abilities, security selection abilities

JEL Classification: G11, G15, G20

Suggested Citation

Tsai, Hui‐Ju and Wu, Yangru, Performance of Foreign and Global Mutual Funds: The Role of Security Selection, Region‐Shifting, and Style‐Shifting Abilities (November 2015). Financial Review, Vol. 50, Issue 4, pp. 517-545, 2015. Available at SSRN: https://ssrn.com/abstract=2679127 or http://dx.doi.org/10.1111/fire.12076

Hui‐Ju Tsai (Contact Author)

Washington College

300 Washington Ave
Chestertown, MD 21620
United States

Yangru Wu

Rutgers University, Newark - School of Business - Department of Finance & Economics ( email )

1 Washington Park
Newark, NJ 07102
United States
973-353-1146 (Phone)
973-353-1006 (Fax)

HOME PAGE: http://andromeda.rutgers.edu/~yangruwu

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