Performance and Chracteristics of Danish Mutual Funds

Mikkel Bjørn Frederiksen

Student thesis: Master thesis

Abstract

In this study the performance and persistence of 66 Danish mutual funds was assessed in the period from 2006 to 2018, using both the Jensen alpha model and the Treynor and mazy market timing model. Furthermore, was the relationship between the excess return of the funds and their characteristics examined using a pooled cross-sectional regression. The results show that the Danish mutual fund as a group do not possess stock-picking skills, nor do they possess market timing. However, the group of funds investing in the Danish market did showed some signs of market timing ability, and they generate positive alphas more often than the funds investing in European and Global stocks. There is no evidence supporting persistence among the Danish mutual fund’s performance. This is both when examining the funds year over year and using subperiods of 3 years. Evidence from a cross-sectional regression, with Jensen’s alpha as independent variable, and various fund attributes as dependent variable, shows that costs have a significant negative effect on the risk adjusted return of Danish mutual funds. The results also showed evidence of significant positive relation between the return of a fund and the inflow of money into the fund, documenting the existence of the smart money effect on the Danish mutual fund market. Furthermore, is the level of front-end and back-end loading fees found to have significant effect on the return of funds investing in the Danish market.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages79