AN EMPIRICAL STUDY TO EXPLORE THE RISK ADJUSTED PERFORMANCE OF MUTUAL FUNDS: A CASE OF PAKISTAN

Abstract

Purpose The research aims to explore the risk adjusted performance of mutual funds in Pakistan. Methodology & Design The research is based on inductive approach and secondary sources of data. The data has been collected for a total of 29 mutual funds from authentic sources such as the website of Mutual Fund Association of Pakistan and other online websites for Beta and Risk-Free Return. The tests are run on the data processed using Treynor Measure and Sharpe Ratio. Findings It can be concluded that the risk adjusted performance of the mutual funds is lower than the absolute performance and the returns and risk also vary with respect to the time frame considered for the returns. Limitations Firstly\ the research utilizes the secondary sources of data only; the usage of primary sources of data can provide insights about internal operations of the mutual funds in Pakistan. Another limitation is that the research has studied 29 income based funds only and the study of more fund categories could have expanded the scope of the research. Recommendations • As the risk adjusted returns for majority of the income mutual funds are positive, the investors are recommended to invest in the mutual fund. • The investors are recommended to consider wide range of mutual funds while investing. • The mutual fund companies are recommended to alter their portfolios in the cases when they are not able to generate positive risk adjusted returns.