Benchmarking Australian Fixed Interest Fund Performance: Finding the Optimal Factors

34 Pages Posted: 17 Nov 2006

See all articles by Victor Soucik

Victor Soucik

School of Finance and Business Economics

David E. Allen

School of Mathematics and Statistics, The University of Sydney; Financial Research Network (FIRN); Department of Finance; School of Business and Law, Edith Cowan University

Abstract

In this paper, we analyse the performance of Australian fixed interest managed funds and assess multiple benchmarks through which such performance can be reliably measured. We examine the effectiveness of seven indices of bond performance, as well as factors impacting on fixed interest asset values and, hence, returns, including interest rate fluctuations, economic fundamentals, maturity risk, default risk and cross-market influences. We test all combinations of factors in cross-section and time series to find the optimum benchmark. The results, consistent across time, show that a correct combination of a fund-based market variable, a mixture of interest rate factors and economic factors as well as a proxy for movements in the equity markets yield the optimal benchmark.

Suggested Citation

Soucik, Victor and Allen, David Edmund, Benchmarking Australian Fixed Interest Fund Performance: Finding the Optimal Factors. Accounting and Finance, Vol. 46, No. 5, pp. 865-898, December 2006. Available at SSRN: https://ssrn.com/abstract=945478 or http://dx.doi.org/10.1111/j.1467-629X.2006.00188.x

Victor Soucik (Contact Author)

School of Finance and Business Economics ( email )

100 Joondalup Drive
Joondalup, WA 6027
Australia
+61 8 9400-5470 (Phone)
+61 8 9400-5271 (Fax)

David Edmund Allen

School of Mathematics and Statistics, The University of Sydney ( email )

School of Mathematics and Statistics F07
University of Sydney
Sydney, New South Wales 2006
Australia

HOME PAGE: http://www.maths.usyd.edu.au

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Department of Finance ( email )

Taiwan
Taiwan

School of Business and Law, Edith Cowan University

100 Joondalup Drive
Joondalup, WA 6027
Australia

HOME PAGE: http://www.dallenwapty.com

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