Portfolio Diversification and Net Selectivity Performance of Mutual Funds in Iran by Using Fama Decomposition Model

Authors

1 Department of Economics, Kish International Campus, University of Tehran, Kish, Iran.

2 Faculty of Economics, University of Tehran, Tehran, Iran.

Abstract

The main purpose of this paper is to analyze the performance of mutual funds in Iran using the Fama decomposition model (1972). Thus, the daily data of 55 mutual funds during four years from 21/3/2014 to 21/3/2018 were investigated. First, the performance of mutual funds was broken down into Fama components to achieve this goal. It was shown that mutual fund diversification and risk performance were negative, but net selectivity performance was positive. Finally, the panel method was used to investigate the effect of Fama's components on the performance of mutual funds. The results indicated that the effect of Fama's components on the performance of mutual funds is positive, and the effects of the net selectivity and risk are more than diversification.

Keywords

References

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Iranian Economic Review
Volume 24, Issue 2
May 2020
Pages 471-487

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