Performance of mutual funds during the Covid-19 pandemic compared to the 2008 financial crisis
Master thesis

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Date
2021Metadata
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- Master of Science [1822]
Abstract
Throughout this thesis we have investigated the American and Norwegian mutual
funds’ performance by employing Jensen’s alpha (1968), Fama and French’s Threefactor
model (1993), Carhart’s Four-factor model (1997), Fama and French’s Fivefactor
model (2015), and further ran a bootstrap simulation similar to that of
Kosowski et al. (2006) and Fama and French (2010). The purpose of this thesis is
to examine how actively managed equity mutual funds have performed during the
Covid-19 pandemic, which in this thesis is defined as the period between January
2019 to January 2021, compared to the 2008 financial crisis. Thus, we have
evaluated performance on both the entire sample period consisting of data from
2007-2021, as well as sub-periods representing the two different crises where the
market was in recession and a control period where the market was in expansion.
We do not find evidence that U.S. mutual funds on average are able to generate
abnormal returns in any of the time periods, nor possess the sufficient skills to cover
their cost in the full period, the control period, or during the Covid-19 pandemic.
However, during the financial crisis, we did find an increase of alpha in all models
with evidence of some good skill among the fund managers. The alphas are only
statistically significant with regards to the total period and the control period.
We found, nevertheless, the opposite results in Norway. Our findings indicate that
the alpha is significantly positive in the total period, and positive even during the
financial crisis and the control period. In these periods the mutual fund managers
did show evidence of skill after adjusting for luck. Despite this, the alpha is
observed as negative through the Covid-19 pandemic, and our simulation indicates
that this is due to poor skill.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2021