Indonesian Mutual Fund Performance
25 Pages Posted: 22 Jul 2021 Last revised: 3 Dec 2023
Date Written: November 18, 2023
Abstract
In this article, we examine mutual fund performance in Indonesia using daily data over a period of 22 years. The performance of Indonesian equity funds is evaluated employing a survivorship bias free sample using both conditional and unconditional models, for this purpose we use the Carhart four-factor model. Indonesia is the fourth most populous country in the world with 273 million inhabitants in 2021 and it is expected that in 10 years it will enter the top 4 of the largest economies by GDP (by then it will be 300 million Indonesians. We find that Indonesian funds prefer small and value (high book-to-market) stocks, we show that all investment styles portfolios significantly outperform the market delivering positive alphas after we account for usual risk factors in stock returns. We can conclude that Indonesian funds yield a positive risk-adjusted performance to their potential wealth-maximizing investors in contrast to the predominant US evidence. All investment style portfolios are able to capture new information on time to compensate their fees and add value for the investor.
Keywords: Mutual Fund; Performance Persistence; Indonesia; Factor Models
JEL Classification: G11, G12
Suggested Citation: Suggested Citation