Impact of Portfolio Allocation on the Performance of Indian Mutual Funds
Journal of Economics and Trade,
Retail investors face a dilemma in selecting funds from among the wide range of schemes available. The past performance of a fund is not always indicative of its future performance, but it is the only quantitative way to judge how good a fund is at present. Investors always prefer funds which give high returns and have low risk. Thus while building a fund portfolio the fund manager should understand the impact of portfolio allocation in different instruments on the performance of the portfolio. The objective of the present study was to find the short-term effects of portfolio allocation on the performance of mutual funds. The data for the study consisted of the portfolio allocations and the performance measures of a sample of one hundred and nineteen open-ended mutual fund schemes, of which thirty-eight were diversified debt/ income funds, forty-eight were diversified equity funds, twenty-one were balanced funds, and twelve were short-term debt funds. The performance measures used for the analysis were: mean returns, standard deviation in returns, beta, and Sharpe ratio. The portfolio allocation of the funds was described both in terms of the percentage allocated in equity, debt, and cash & equivalents, and in terms of the percentage allocated in different sectors. The data was entirely secondary data, and was collected from the AMFI website. The findings of the study indicate that, for different types of funds, allocation in different asset classes, that is, equity, debt, and cash & equivalents, as well as their sector-wise allocation tend to impact the performance of the fund.
- Portfolio allocation
- performance measures
- mean returns
- standard deviation of returns
- sharpe ratio
How to Cite
Gavrilakis N, Floros C. The impact of heuristic and herding biases on portfolio construction and performance: the case of Greece. Rev Behav Fin. 2022;14(3):436-62. DOI: 10.1108/RBF-11-2020-0295
Markowitz HM. Mean-variance analyses in portfolio choice and Capital Markets. Oxford: Basil Blackwell, Inc; 1987.
Sharpe WF. Asset allocation: management style and performance measurement. J Portfol Manag; 1994.
Ibbotson RG, Kaplan PD. ”Does Asset Allocation Policy Explain 40%, 90%, or 100% of Performance?” Yale Working Paper Series; 1998.
Drobetz W, Köhler F. The contribution of asset allocation policy to portfolio performance/ Department of Finance, Working Paper No. 2/02. Fin Mkts Portfolio Mgmt. 2002;16(2):219-33. DOI: 10.1007/s11408-002-0205-8
Kadiyala P. Asset allocation decision of mutual fund investors. Financ Serv Rev; 2004.
Sharpe WF. Determining a Fund’s effective asset mix. Investment management review; 1988.
Furfine C. Bank portfolio allocation: The impact of capital requirements, regulatory monitoring, and economic conditions. Journal of Financial Services Research. 2001;20(1): 33-56.
Heaton J, Deborah Lucas D. Portfolio choice in the presence of background risk. The Economic Journal. 2000;110(460): 1-26.
Sapkute EG, Sánchez-Granero MA, López-García MN, Trinidad-Segovia JE. The impact of regulation-based constraints on portfolio selection: The Spanish case. Humanities and Social Sciences Communications. 2022;9:1-14.
Abstract View: 94 times
PDF Download: 3 times