Determinants of Mutual Fund Performance in India
Written By
Prateek Sehgal, Jyoti Chauhan, Patan Mohammed Jakariya,
Nirmal Kumar
Under the guided supervision of
Mrs. Ruchi Kakkar
Introduction
A mutual fund is an investment tool that garners the investors saving who share the thought
of attaining a higher financial goal with time. The money accumulated from the investors is
used in market instruments which might be shares, debentures and other form of securities.
The profits made by the investment instruments are shared by the unit holders and equally
divided on the basis of the number of units being owned by them. A Mutual Fund offers the
most viable opportunity for investing into a diversified portfolio which is the most suitable a
common man should make investment to make future gains, by investing small amounts
monthly in a professionally managed basket of securities.
Optimal diversification of an investment in a portfolio helps reduce the risk and improve
returns of the portfolio amongst small investors. When returns of a mutual fund are compared
with individual investments of a portfolio, the returns are always more safe and value
proportion always exceeds to the comparison it is being made to. Dividend received by
investors are tax free and the yield offered by it is more in comparison to other investment
options. It also offers the investors flexibility to invest monthly or take out their funds on the
account of their comfortability and need.
As India is an emerging market and has become a hotspot for all the global players who are
attracted towards here with the intent of making investment. With most of the government
policies being liberalized led to financial instruments getting developed. Investors receive the
money based on the units they have invested in the capital market which is also popularly by
the term known as NAV. NAV which is known as Net Asset Value its value increases
normally with time and one receives higher rate of returns with a longer duration. Fund
Manager focusses primarily on taking the scrip under value and selling those stocks at a
higher value. His main aim is to maximize the returns and minimize the risks which is
primarily done by portfolio diversification. All stocks might not move up some may move
down as well so portfolio diversification helps minimizing that risk.
SEBI has been the regulatory body who formulates rules and regulations of mutual funds to
protect the investors which are even revised from time to time. Be it public, private or maybe
directed by foreign entities all are governed by the regulatory body SEBI. A SEBI approved
AMC i.e Asset Management Company can manage funds for making investment in different
types of securities. A custodian who is registered with SEBI can hold securities of various
schemes of fund. The rules and regulations regarding mutual funds assure the investors that
they are within the strict guidelines and framework suggested by AMFI and SEBI. AMFI
always works in upgrading and promoting its practices, professional standards by working
on diverse areas such as valuation, transparency etc.
Mutual funds are subjected to market risks be it profit or loss, the investors share the
proportion of either being incurred at the current point of time. Mutual funds are revised and
brought with several schemes from time to time.
A mutual fund is an investment tool which accumulates the savings of investors and is
professionally managed by a fund manager who shares the goal of financial gain. The profits
made by these investments are shared with the investors on the basis of the units held by
them. It’s the best investment tool offered to common man with low amount to invest and
minimized risk as it is invested in a diversified portfolio. Every investment Mutual fund
scheme has its own said strategy with a varying objective.
Hierarchal Order Followed by Mutual Funds
A Mutual Fund in India has a mechanism which follows a three tier structure in which the
first tier is of Sponsor whose job is to mainly approach SEBI. SEBI being the regulatory body
for mutual funds has a set of guidelines and structure. Once the said criterion is met and
regulatory body feels strong confidence into it, Sponsor creates a public trust which is the
second tier under the Indian Trust Act 1882. Being a trust it has no legal identity and is
therefore void of entering into contracts, Trustees are the people of authority who can act on
behalf of the Trust.
Once the trust is created and name of the trustees are entered into the contract with SEBI the
trust hereby would be known as Mutual Fund.
The third tier being appointing an AMC by the trustees who would manage the investors
capital on a daily basis. A fee is borne by the investors for the services offered by the AMC
from the money taken from the investors. A draft document needs to be submitted to SEBI in
order to gets its approval for launching a new scheme. After receiving the approval for the
Offer document the said document becomes a legal document on which the investors could
rely for information for the offered scheme. A due diligence certificate needs to be signed on
the offer document by the Compliance officer.
A third party custodian is required to safeguard investors interest, this three tier structure
eliminates all risks of fraudulent activity as it seperates fund managers from physical
securities and investor records. Custodian manages the physical securities, regulations which
have been provided by the regulatory body are that custodian and sponsor always should be
two separate entities.
A RTA is one spot where you can find all the information about the fund plans, though the
fund houses offer the same. Different Schemes information can be attained from them by
visiting them, all in one place instead of going to separate fund houses. All the records of an
investor, NAV value , folio number, exit loads all rests with the RTA i.e Registrar and
Transfer Agents.
The determinants of mutual fund industry mainly attribute to fund attribute which include
fund size, fund tenure, management structure, management tenure and country characteristics
which include economic development, financial development, investor protection, country’s
mutual fund industry age and correlation between countries market return and other market
return.
Fund Size :
Mutual Funds be it small or large have their own fare share of advantages and disadvantages.
Large Funds can benefit from economies of scale and are able to conduct more research with
an abilility to spread fixed expenses over a greater asset base. More beneficial opportunities
are available to larger funds than smaller ones. Though it is found that fund returns decline
with fund size. Funds size is measured by funds portfolio total net assets at the end of the
year.
Fund age:
The main parameters which fall in this range are the duration of the fund and ability of the
manager to manage the fund. It is believed that younger funds have a smaller duration
compared to the older ones. Risk of manipulation and underperformance are expected in the
case of small funds. Fund age is measured by the number of years from the date it was
launched.
Management tenure:
It is believed that a manager with a longer tenure could actually perform better than a new
one, which would actually make the investors more inclined to invest their capital in the
instrument. Management tenure for a manager depends on the fees being paid to him, shorter
tenure ones are paid with more incentives. It is said that the experienced ones should be paid
more and incentivized more which can help in increasing the performance of mutual fund.
Investor Protection:
It is found that the investors are more inclined to make investment only when they feel that
the legal system of a country is robust and their rights as an investor are protected. Difference
in laws and regulations influence investors behavior and make them reluctant towards
investment which can affect the mutual fund performance as well.
Familiarity:
It is believed that investors would earn higher returns with more familiarity to the product
rather than any nearby investment tool or by hedging a position. A strong relation is believed
to be between familiarity and fund performance.
Literature Review
Lehmann and Modest (1987) studied that whether last name of author only do for all
only last name and then year
Bruce N. Lehmann and David M. Modest (1987) The paper ascertains to whether
conventional measures of abnormal mutual fund performance are sensitive to the benchmark
chosen to measure normal performance. Principal-components, instrumental-variables
estimator, Arbitrage Pricing Theory would be the factors. The choice of what constitutes it to
be is the normal performance which is important for evaluating the performance of managed
portfolio.
Mark Grinblatt and Sheridan Titman (1994) suggests to compare the returns and performance
on monthly basis as well as to analyse the determinants of mutual fund performance. The
factors would be Net asset value, load, expenses, portfolio turnover Statistical tools, Stock
Data and Mutual Fund Data. CAPM would be the model which was used in order for the
study. The study reveals that the performance is positively related to portfolio turnover, but
not to the size of the mutual funds or to the expenses that the funds generated.
M. Jayadev (1996) study suggests that the growth oriented Mutual Fund are earning higher
returns than the benchmark returns (or market Portfolio/Index returns) in terms of risk. The
factors being considered are NAV, share price index and Secondary data. Janson Presents
return and risk of the two funds along with market return and risk were the research
methodology used for measuring performance, as well as CAPM was also used.
Kent Daniel, Mark Grinblatt , Sheridan Titman and Russ Wermers (1997) addresses the
benchmark issue by introducing a new performance measurement method that forms
benchmarks by directly matching the characteristics of the component stocks of the portfolio
being evaluated. The factors would CS, CT and AS. CS, CT, and AS measures Secondary
data CS, CT, and AS measures "three performance attribution components are presented for
funds in different investment objective categories.
Yoon K. Choi and B.P.S. Murthi (2001)suggests about an algebraic and conceptual link
between our index and the Sharpe index which is firmly established by his new theory. An
empirical evidence regarding returns to scale, adequacy of expense ratios, loads, turnover
ratios, all of which is a valuable information for fund management is studied. "Jensen's alpha,
Sharpe index" Secondary data Sharpe Ratio, Treynor’s Ratio and Tracking error" are the
factors and tools which are used to find that all fund categories except income funds have
similar average performance scores. There is no evidence of superior performance across
different fund categories after controlling for returns to scale which has been observed in this
study.
Melissa B. Frye (2001) finds support for the hypothesis that banks may target and attract
investors different from those attracted to nonbanks. Specifically evidence is found that banks
may market more to individual investors than to institutional investors. Risk and Return
Results secondary data and standard deviation are calculated for the study methodology It is
found that bank-managed bond mutual funds do not underperform nonbank funds. There is
very little difference between the risk-adjusted performance of bank-managed mutual funds
and nonbank-managed mutual funds. However, evidence is found in the study that bank
managers are more conservative in investment strategy"
Dr S Narayan Rao (2003)"found that the returns differ provided by the individual schemes
and the risk levels at which they are delivered in comparison with the market and the risk free
rates. The primarily aim being to detect the out-performers. The objective of the study is to
evaluate the performance of Indian Mutual Fund Schemes in a bearish market relative to
performance index. Risk-return analysis Treynor’s ratio, Sharpe’s ratio Sharpe’s measure,
Jensen’s alpha were the methodology used to calculate the performance.
Radu Burlacu, Patrice Fontaine, Sonia Jimenez-Garces (2006) assessed the extent of
informational advantages of fund managers by focusing on the degree of industry
concentration of the funds’ portfolio. Ratios and theoretical justification were used in part of
the study. The Equilibrium models were used for studying the industry concentration.
This paper has investigated this hypothesis by approaching informational advantages with a
measure of industry concentration.
Rao, Dabbeeru Neelakanteswar (2006) classified the open-ended equity mutual fund
schemes into different investment styles, Analysis was conducted to evaluate the performance
of open-ended equity mutual funds of two dominant investment styles as per the
classification adopted, and also to ascertain whether the differences in performance of the two
chosen schemes of dominant investment styles are statistically significant. Open-ended equity
mutual fund schemes, Net Asset Value, Capital Asset Pricing Model. Hypothesis testing,
Sharpe ratio were the models which were used for conducting the study and for the
evaluation. Most important finding of the study has been that only four Growth plans and one
Dividend plan (5 out of the 42 plans studied) suggest that it would generate higher returns
when compared to the market returns.
Timotej Jagrica, Boris Podokonib, Sebastjan Straseka, Vita Jagrica (2007) have suggested in
their paper that the mutual fund industry applies various tests to evaluate the performance
capacity of mutual funds, Financial market, portfolio return and risk measures. Secondary
data was used for analysis and evaluation of the market portfolio. Standard deviation of
returns, Sharpe, Treynor and Jensen measures were used as the methodology tools. The
Sharpe and Treynor ratios provided similar rankings if funds were well diversified. The
rankings suggested that all the funds on which the study was conducted had outperformed the
market on a risk-adjusted basis.
Sathya Swaroop Debasish (2009) measures the return earned by the sample mutual funds
schemes and compares it against the market portfolio returns for distinguishing the
performers from the laggards.Sharpe, Treynor and Jensen were used as the methodology for
the analysis and evaluation of the study. The study suggested that the performance of mutual
funds classified as private sector and public sector in summarized form showed various
parameters of performance. On the basis of returns, mutual fund schemes and Franklin
Templeton schemes have performed excellently in public and private sectors respectively.
Nadine Gatzert, Hato Schemeiser" (2009) compared pricing and performance of two mutual
funds with different investment guarantees: The first contract provides an interest rate
guarantee on the premiums paid into the contract. The second product includes a lookback
guarantee, under which the payoff is defined by the number of units the client acquired over
the contract term multiplied by the highest value of unit price achieved before maturity.
Sharpe Ratio, Jenson’s Alpha and Treynor’s Ratio were used mainly as methodology for the
study. Sharpe ratio suggested the impact of the underlying fund with respect to the embedded
guarantees was analysed by comparing a conventional fund with constant parameters over the
contract term and a managed fund. Results were derived in a simulation analysis for different
diversified portfolios based on stock, bond, real estate, and money market indices.
Keith Curtburtson, Dirk Nitzsche and Niall o’Sullivan (2010) Measured the ex-post
performance and predictability in performance of mutual funds which could interpret the
direct tests of the Efficient Markets Hypothesis (EMH) in a market where entry barriers are
relatively low Factor Models Secondary data Style Factors, Unconditional Models were used
for measuring the performance of mutual funds. These methodologies have also been applied
to pension funds and more recently to hedge funds and even to venture capital funds.
Prof A.Q. khan, Sana Ikram (2011) analysed the equity and balanced schemes of five
different mutual funds. A comparison was conducted on the performance of mutual funds
with the benchmark index. Analysis was also conducted on the mutual fund performance in
the index capital market mutual fund and market efficiency. Sharpe’ s, trenor's ratio and
jenson’s alpha was used as a methodology measure. It suggested that the fund scheme had
outperformed the market which means the fund manager had been successful in the
outperformance of the relevant benchmark during the study period.
MS. Sarika Keswani (2011) analysed the effect of funds size on the performance of
Balanced mutual funds in the Indian context, to ascertain the degree or power of relationship
between fund size and performance. Return per risk, sharpe ratio, fund momentum, fund size
were used as the methodology. The ANOVA model showed that the performance variable of
micro- small, medium, and large balanced fund indicated that these variables are not
signification of difference from each other. All the cases of differences leading to rejection of
null hypothesis.
Deepak Agrawal (2011) in his paper suggested a process to analyse the Indian Mutual Fund
Industry pricing mechanism with empirical studies on its valuation. It also analyses data at
both the fund-manager and FundInvestor levels. The methodology being used were Standard
Deviation, Correlation analysis, Coefficient of Determination, Return on Mutual Funds,
Variance, Coefficient of Variation, SENSEX & S & P CNX NIFTY Index return. It showed
degree of correlation between the variables of the tabulated data for the various periods.
Miguel A. Ferreira, Aneel Keswani (2011) suggested that the factors which were required for
the performance of open-end actively managed equity mutual funds in twenty seven countries
were assumed to be the same. It was found that mutual funds underperformed the market
overall. The factors which were considered were Fund characteristics, Country
Characteristics. SMB Factor, HML Factor and MOM were used as the models for the study.
It was observed a country characteristics are able to explain mutual fund performance beyond
fund characteristics. There is a positive relation between mutual fund performance and a
country’s level of financial development, especially stock market liquidity.
Sahil Jain, Dr. Aditi Gangopadhyay (2012) had the objective of the study as to bring out a
comparison between the performance of equity-based mutual funds of public and private
sector in India. The basic tool would be the Capital Asset pricing model comparison,
performance, risk-return were used as methodology. Risk free rate of return, expected rate of
return, systematic risk’s long run were used as factors. private sector companies have
performed far better than the public sector once. HDFC and ICIC have been the
outperformer, whereas LIC has been the worst.
Bill Ding,Russ Wermers (2012) revealed that fund outflows were ineffective in forcing out
poorly performing experienced managers; the flow variable is insignificant in legit
replacement regressions for fund managers who had at least ten years of experience" CDA-
CRSP contains data on various fund statistics, Secondary data was used for conductig the
analysis. CDA-CRSP contains data on various fund statistics, experience and (advisor-level)
stock picking track-record of a fund manager are correlated with following-year performance,
however, this relation indicates some evidence of manager entrenchment.
M.S. Annaporna , Pradeep K. Gupta (2013) analysed the returns of mutual fund schemes
ranked by CISIL, and compare the average return of selected mutual fund schemes with SEBI
domestic term deposits rate, and to have a comparative analysis of various categories of
selected mutual fund scheme. performance, mutual fund, CRISIL , credit rating agency.
Secondary data were used for conducting the study. Statistical tools were used for mutual
fund schemes ranked by CRISIL for the study, in the most of the cases the mutual fund
scheme have failed even to provide the return of SBI domestic term desposits. The equity
mutual fund schemes have the potential to provide greater return in long term.
Ms. Shilpi Pala , Prof. Arti Chandani (2014) studied the best mutual fund house in Equity
Mutual Fund category Ratios, Statistical tools Research design, data gathering and data
analysis. Using various statistical tools they measured that the study evaluated the
performance of a few selected income or debt mutual funds schemes of India on the basis of
their daily NAV.
S.prakash, C.sundar (2014) evaluated and compared the performance of equity mutual fund
scheme of selected companies. A comparative performance of equity diversified mutual fund
scheme of selected companies was compared with the market. Risk-return, sharpe ratio,
treynor ratio, jensen alpha, beta were used as methodologies. Secondary data was used in
order to conduct the research. The study helped in creating awareness among the investor
community for choosing the best mutual fund scheme.
Punjika Rathi and Rajan Yadav (2014) have tried to review various studies on mutual funds.
Various studies on mutual funds in India and abroad are analysed to find out the current
scenario, growth prospects, industry structure, challenges and performance of different
mutual fund during the period of 2000-2013 (July). Safety, liquidity, tax benefits, capital
appreciation, mutual fund style, advertising, economies of scale and scope are the factors
which are taken into consideration. Risk adjusted Returns, Hypothesis Testing, Factor
analysis, Correlation and survey are the methodology which are being used in the analysis of
the study. The Questionnaire suggested that the mutual fund industry growth could be
revived by using technology, changing distribution networks and launching investor
awareness programs in areas which lack awareness."
R. Venkataraman and Thilak Venkatesan (2016) analysed the mutual funds during the
financial year for all the funds and the indices. Sharpe Ratio, Jenson’s Alpha, Treynor’s Ratio
and Tracking Error were used as the main methodologies for the study. Secondary data was
used to conduct the study. The study analysed the passive ETF’s & prominent Mutual funds
both active and passive to justify superior returns at lower risk.
Panwar, Sharad and Madhumathi, R (2016) identified differences which were observed in
the characteristics of public-sector sponsored & private-sector sponsored mutual funds and
also compare the performance of public-sector sponsored and private-sector sponsored
mutual funds using traditional investment measures. Factors which were taken into account
were Performance evaluation, risk-return analysis, Net asset value, residual variance, fund
return. Secondary data was used for the study. Jensen’s alpha , Sharpe information ratio,
excess standard deviation adjusted return were used as methodologies for the study. NIFTY
Index was able to provide more significance in statistical terms of portfolio alpha and beta as
compared to CRISIL Balanced Fund Index.
Dr.D.S.Chaubey, Dr. S.M.Tariq Zafar(2016) In their study observed sufficient information of
risk and return associated with fund and their rank depending on their performance which
would ultimately aid the investors to choose the outperforming mutual fund with maximum
return and minimum risk. The methodologies which were used were Research design and
Sampling technique. Sharpe index, Treynor ratio, Jensen’s alpha were the methodologies.
The mutual fund future would be existing and bright under SEBI regulations in the current
prevailing market conditions, in long run only when committed serious players will survive.
Ingrid-Mihaela Dragotă, Delia Tatu-Cornea, Narcis Tulbure (2016) showed that industry is
larger in developed countries with greater stock market liquidity, with low ratios of
remittance inflows to GDP, and in which the industry is older. The factor which was
considered was the Impact of Socio cultural variable. Regression Model, NAV/POP
Questionnaire were used as the methodologies for analysis. The experimental surveys
employed in the behavioural finance literature, or extending this analysis to other sectors of
the capital market such as insurance and pension funds.
Dr.Gurmeet Singh (2016) suggested that the results of regression analysis revealed that the
fund family size, fund size, fund age, management experience, and management tenure
significantly influenced the returns of mutual fund products under the study. Financial
Planning, Asset management company were used as factors. Sampling Technique, Sampling
size were used as the methodologies.The theory estimates show that a long-run relationship
exists between fund returns of mutual fund products and the independent variables.
Tej Singh and Parul Mittal (2016) presented an overview of the salient socio-economic
characteristics of the sample households which were to analyse the impact of SHGs on
employment and income level of the members. Research Methodology which was imparted
were t-test (paired), Z test and Chi-square. The model used in this study was Econometric
Analysis (OLS Model).The priority of members was to satisfy their basic needs through
SHGs. Some members had also settled their life in well manner with the help of SHGs.
Besides, SHGs helped members to increase their income level through economic activities
for providing them better living conditions and making them independent.
Ratish Gupta, Shruti Maheshwari (2017) evaluated the risk and return of large and mid-cap
funds Ratios. The methodologies which were used were Standard Deviation and Beta
Financial Performance evaluation technique. The study suggested that small investors can
expect a double digit return if they keep a healthy ratio of large cap and mid cap funds in
their portfolio.
Mohammed Sadiq, Ann-Ngoc Nguyen, David Kernohan (2018) The paper finds that the
returns of mutual funds are positively associated with investor confidence and an interaction
effect exists between investor confidence and persistence in performance. Dependent and
Independent Variables Investor confidence SENTI, NAV's, TNA's ,two stage least squares
(2SLS) regression and the Generalized Method of Movement (GMM) analysis were used as
models for the study. The returns of the mutual fund are also positively associated with other
fund characteristics such as fund size, turnover and fund age. The maturity of funds enables
better operating efficiency through a reduction in operational expenses.
Pankaj K. Agarwal, H. K. Pradhan (2018) To examine the existence of superior performance
of open-ended equity mutual funds in India with various models. The factors which were
considered were "Return from portfolio p at time t RFt = Risk-free rate at time t RMt =
Return of a market portfolio at time t βp = CAPM beta βpt = Coefficient of market timing αp
= Measure of selection ability" "return frequency, and effects of heteroscedasticity and
autocorrelation (HAC). The methodology and models which were used were Capital Asset
Pricing Model (CAPM), Fama–French–Carhart (FFC)-factors-based models. This appears
more plausible than assuming that fund managers might be engaging in activity specialisation
pursuing one of the either strategies.
Prof. (Dr.) Anil Vashisht (2019) to study the phenomenal growth of mutual fund industry in
India and reasons for its increasing penetration among common people. Factors which are
considered are Mean-Variance, Return-Cost Efficiency and Economic Scale Ratios and
graphs. The Empirical Model Examined the seven categories of mutual funds including
aggressive growth, asset allocation, equity-income, growth, growth-income, balanced, and
income.
Khushboo Basedia (2020) studied the various aspects and forms of Mutual Funds schemes in
India and measures and also compares the performance of the select mutual fund schemes. To
understand and analyse the factors affecting the performance of mutual fund schemes in India
Factors which were considered were Professional management, Fund ownership ,Diversified
investment. Secondary data was used for the study. The methodology used was NAV, beta, R
square, average return, standard deviation for the suggested study. Most of the investors have
been investing in Growth, Income and Balanced mutual fund schemes
Objectives of the study:
The study mainly deals with the factors and determinants that play a pivotal role in its
performance with the main objective of analyzing its position in India. To achieve the said
objective following are the sub objectives which need to be followed:
To examine the position of Mutual Fund Industry after the Covid scenario
To examine the performance of varying schemes of mutual fund in terms of risk and
return on the basis of variability and volatility
Comparative performance of periodic schemes with the benchmark.
All these objectives present in any paper? Send your base paper
Research Methodology
Research design
Sample size
Variable description
Data collection
Period of study
Technique used
Fill these headlines, refer to report I sent to you
Absolute Return:
Absolute return is one of the most common methods for calculating a mutual funds return. It
mainly takes into accordance two NAV dates one at the beginning and the other at the end
holding period. The difference of the two is divided by the beginning in order to get the
return. The benefit of using this tool is it can be used at all kinds of funds.
Absolute Return = NAVEND - NAVSTART X 100
NAVSTART
Total Return:
It eliminates the limitations of absolute return by including dividends in the equation.
Dividends are added to the difference of the end and beginning which is further divided by
the start.
Total Return = Dt +( NAVEND - NAVstart) X 100
NAVSTART
Compound Annual Growth Rate (CAGR):
This is used when the holding period supposedly exceeds the period of three years. It assumes
a steady growth rate while reducing the effect of volatility or short term fluctuation on a fund
NAV.
CAGR = T - 1 1/N
Sharpe Ratio:
This ratio is mainly used to calculate return and has been a commonly used benchmark. It
mainly helps to decide which is a better investment to make. Higher the Sharpe ratio more
desirable would be the investment.
Sharpe Ratio= (Rx- Rf) ÷ StdDev(Rx)
Where :
Rx = Average rate of Return
Rf = Risk Free Rate
StdDev= Standard Deviation of R
R Square:
R Square is mainly the correlation between portfolio and its benchmark. A higher benchmark
suggests a stronger correlation while a lower suggests a weak one.
Correlation = covariance between index and portfolio
Standard deviation of portfolio * standard deviation of index
JENSON’S ALPHA:
It measures the difference between the expected performance and actual performance of a
funds return. A positive alpha would suggest that it has outperformed its beta while a
negative would suggest the contrary. It gives an investor an idea how well the fund would
perform in regards to risk.
Alpha = {( Fund Return – Risk Free Return) –( Beta Funds) *( Benchamark return – risk free return)}
BETA
Beta measures the changes which happens in overall stock market. It is used for measuring
the combined risk of a combined portfolio of mutual funds.
Beta = Standard Deviation of Fund x R- Square
Standarad Deviation of Benchmark
TREYNOR RATIO :
It mainly shows how well the returns and performance for the investment tool has been. It
relies on beta which measures its sensitivity to market movements to measure risk.
Treynor Ratio = Total Portfolio Return - Risk Free Rate
Portfolio Beta
Limitations:
The limitations which were observed while doing the study are:
Shortcoming were observed for the availability of secondary data at times.
Taxes, Entry and exit load and brokerage commission charges were not considered.
Present study was confined to the regulated environment of Mutual Fund Industry.
For the time not required
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