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Comparison of mutual fund ranking patterns: A case of U.S. technology sector funds

Peci, Albiona LU and Lomakina, Marina LU (2018) NEKN02 20181
Department of Economics
Abstract (Swedish)
This paper presents a comparison of ranking between two different performance measures, Sharpe Ratio and Certainty Equivalent Returns, on U.S. tech sector funds. Firstly, we compared the ranking of funds based on the Sharpe Ratio family, i.e. the traditional Sharpe Ratio, Reward-to-VaR and Reward-to-ES. The strong correlation between the rankings is in line with the previous studies. Further, by comparing the fund rankings based on traditional Sharpe Ratio and CER, we also detected a strong rank correlation. The strong correlation was not expected since the data sample is not normally distributed, and the utility function is not quadratic. Further, we applied Fama French Three and Five Factor Model in order to analyse the factor loadings... (More)
This paper presents a comparison of ranking between two different performance measures, Sharpe Ratio and Certainty Equivalent Returns, on U.S. tech sector funds. Firstly, we compared the ranking of funds based on the Sharpe Ratio family, i.e. the traditional Sharpe Ratio, Reward-to-VaR and Reward-to-ES. The strong correlation between the rankings is in line with the previous studies. Further, by comparing the fund rankings based on traditional Sharpe Ratio and CER, we also detected a strong rank correlation. The strong correlation was not expected since the data sample is not normally distributed, and the utility function is not quadratic. Further, we applied Fama French Three and Five Factor Model in order to analyse the factor loadings of equally weighted portfolios created based on the rankings using the traditional Sharpe Ratio and CER(10). Our empirical results show that the FF3FM can provide better explanation of variation of portfolio returns. Further, we did not find any correlation between the concentration of funds in the technology industry and their respective returns. (Less)
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author
Peci, Albiona LU and Lomakina, Marina LU
supervisor
organization
course
NEKN02 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
Mutual Funds, Sharpe Ratio, Certainty Equivalent Returns, Value at Risk (VaR), Expected Shortfall (ES), Fama-French-Three Factor Model, Fama-French-Five Factor Model
language
English
id
8949317
date added to LUP
2018-07-02 15:40:23
date last changed
2018-07-02 15:40:23
@misc{8949317,
  abstract     = {This paper presents a comparison of ranking between two different performance measures, Sharpe Ratio and Certainty Equivalent Returns, on U.S. tech sector funds. Firstly, we compared the ranking of funds based on the Sharpe Ratio family, i.e. the traditional Sharpe Ratio, Reward-to-VaR and Reward-to-ES. The strong correlation between the rankings is in line with the previous studies. Further, by comparing the fund rankings based on traditional Sharpe Ratio and CER, we also detected a strong rank correlation. The strong correlation was not expected since the data sample is not normally distributed, and the utility function is not quadratic. Further, we applied Fama French Three and Five Factor Model in order to analyse the factor loadings of equally weighted portfolios created based on the rankings using the traditional Sharpe Ratio and CER(10). Our empirical results show that the FF3FM can provide better explanation of variation of portfolio returns. Further, we did not find any correlation between the concentration of funds in the technology industry and their respective returns.},
  author       = {Peci, Albiona and Lomakina, Marina},
  keyword      = {Mutual Funds,Sharpe Ratio,Certainty Equivalent Returns,Value at Risk (VaR),Expected Shortfall (ES),Fama-French-Three Factor Model,Fama-French-Five Factor Model},
  language     = {eng},
  note         = {Student Paper},
  title        = {Comparison of mutual fund ranking patterns: A case of U.S. technology sector funds},
  year         = {2018},
}