Performance Evaluation of Swedish and German Actively Managed Mutual Funds

Abstract

There are many studies examining the performance of actively managed mutual funds in different markets. The results of these studies vary depending on the used model and market. This thesis does as most of the previously mentioned studies use the Capital Asset Pricing Model (CAPM) as a baseline model, moreover this thesis uses the Fama-French Three Factor Model (FF3), which incorporates the value and size of the firm in the model. Inspired by Ferson and Schadt (1996) we modify our models by adding an information variable enabling us to present a result which in some regards are similar to previous studies. The results of our study shows that Swedish actively managed mutual funds have a higher average return, Sharpe ratio, and Treynor ratio than German actively managed funds. The intercepts, which measure the average superior performance, in our models of the Swedish funds are larger than those of the German funds. Our models are further tested by using the correlation, Breusch-Pagan, and Breusch-Godfrey tests.