Analysis of Components of Investment Performance - an Empirical Study of Mutual Funds in India

14 Pages Posted: 11 Feb 2007

See all articles by Ananda S

Ananda S

College of Banking and Financial Studies

V. Murugaiah

Kuvempu University

Date Written: December 18, 2006


In this paper, an attempt has been made to examine the components and sources of investment performance in order to attribute it to specific activities of Indian fund managers. It also attempts to identify a part of observed return which is due to the ability to pick up the best securities at given level of risk. For this purpose, Fama's methodology is adopted here. The study covers the period between April 1999 and March 2003 and evaluates the performance of mutual funds based on 113 selected schemes having exposure more than 90% of corpus to equity stocks of 25 fund houses. The empirical results reported here reveal the fact that the mutual funds were not able to compensate the investors for the additional risk that they have taken by investing in the mutual funds. The study concludes that the influence of market factor was more severe during negative performance of the funds while the impact selectivity skills of fund managers was more than the other factors on the fund performance in times of generating positive return by the funds. It can also be observed from the study that selectivity, expected market risk and market return factors have shown closer correlation with the fund return.

Keywords: Performance Evaluation, Overall Performance, Selectivity skills, Diversification skills, Risk

JEL Classification: G10, G11, G12, G23

Suggested Citation

S, Ananda and Murugaiah, V., Analysis of Components of Investment Performance - an Empirical Study of Mutual Funds in India (December 18, 2006). 10th Indian Institute of Capital Markets Conference. Available at SSRN: or

Ananda S (Contact Author)

College of Banking and Financial Studies ( email )


V. Murugaiah

Kuvempu University ( email )

Shimoga Dist.
Shankaraghatta, Karnataka 577 451

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