Mutual Fund Performance in a Bullish Market During the COVID-19 Crisis
DOI:
https://doi.org/10.32890/ijbf2024.19.1.4Keywords:
Passive fund vs active fund, bullish market, ESG investing, Growth Investing, Morningstar and Lipper ratingAbstract
Active funds vs passive funds represent one of the most prominent investment decisions that ought to be undertaken by investors over the decades. Our paper seeks to offer an insight into the average performance of equity mutual funds during the period when there were roughly 70 ‘all-time-highs’ recorded by S&P 500 amid the COVID-19 health crisis. Additionally, our paper aims to explore the robustness and persistence of the explanatory powers of Morningstar sustainability globes, ratings from agencies and growth tilt during the health crisis. Our results indicated that the benchmark indexes seemed to dominate mutual funds in most cases during our sampling period. The ratings from Morningstar and/or Lipper together with growth investing appeared to be ideal elements to contemplate when making investment decisions during the COVID-19 health crisis.
References
Albuquerque, R., Koskinen, Y., & Zhang, C. (2019). Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 65(10), 4451-4469.
Albuquerque, R., Koskinen, Y., Yang, S., & Zhang, C. (2020). Resiliency of environmental and social stocks: An analysis of the exogenous Covid-19 market crash. The Review of Corporate Finance Studies, 9(3), 593-621.
Bevanda, L., Zaimović, A., & Arnaut-Berilo, A. (2021). Performance of value and growth stocks in the aftermath of the global financial crisis. Business Systems Research, 12(2), 268-283.
Blake, C. R., & Morey, M. R. (2000). Morningstar ratings and mutual fund performance. Journal of Financial and Quantitative Analysis, 35(3), 451-483.
Bogle, J. (2002). An index fund fundamentalist. The Journal of Portfolio Management, 28, 31-38.
Brunnermeier, M. K., & Nagel, S. (2004). Hedge funds and the technology bubble. The Journal of Finance (New York), 59(5), 2013-2040.
Carhart, M. M. (1997). On persistence in mutual fund performance. The Journal of Finance, 52(1), 57-82.
Chevalier, J., & Ellison, G. (1999). Career concerns of mutual fund managers. The Quarterly Journal of Economics, 114(2), 389-432.
Dai, Y. (2021). Can ESG investing beat the market and improve portfolio diversification? Evidence from China. The Chinese Economy, 54(4), 272-285.
Fama, E. F., & French, K. R. (1992). The cross-section of expected stock returns. The Journal of Finance, 47(2), 427-465.
Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3-56.
Fama, E. F., & French, K. R. (1996). Multifactor explanations of asset pricing anomalies. The Journal of Finance, 51(1), 55-84.
Fama, E. F., & French, K. R. (2021). The value premium. Review of Asset Pricing Studies, 11(1), 105-121.
Ferriani, F., & Natoli, F. (2021). ESG risks in times of Covid-19. Applied Economics Letters, 28(18), 1537-1541.
Graham, B. (1949). The intelligent investor. Harper & Brothers.
Griffin, J. M., Harris, J. H., Shu, T., & Topaloglu, S. (2011). Who drove and burst the tech bubble? The Journal of Finance (New York), 66(4), 1251-1290.
Grinblatt, M., & Titman, S. (1989). Mutual fund performance: An analysis of quarterly portfolio holdings. The Journal of Business, 62(3), 393-416.
Grinblatt, M., & Titman, S. (1993). Performance measurement without benchmarks: An examination of mutual fund returns. The Journal of Business, 66(1), 47-68.
Grinblatt, M., Titman, S., & Wermers, R. (1995). Momentum investment strategies, portfolio performance, and herding: A study of mutual fund behavior. The American Economic Review, 85(5), 1088-1105.
Halbritter, G., & Dorfleitner, G. (2015). The wages of social responsibility—Where are they? A critical review of ESG investing. Review of Financial Economics, 26, 25-35.
Hartzmark, S. M., & Sussman, A. B. (2019). Do investors value sustainability? A natural experiment examining ranking and fund flows. The Journal of Finance, 74(6), 2789-2837.
Jensen, M. C. (1968). The performance of mutual funds in the period 1945–1964. The Journal of finance, 23(2), 389-416.
Kim, Y., Li, H., & Li, S. (2014). Corporate social responsibility and stock price crash risk. Journal of Banking & Finance, 43(1), 1-13.
Kosowski, R. (2011). Do mutual funds perform when it matters most to investors? US mutual fund performance and risk in recessions and expansions. The Quarterly Journal of Finance, 1(03), 607-664.
Lakonishok, J., Shleifer, A., & Vishny, R. W. (1994). Contrarian investment, extrapolation, and risk. The Journal of Finance, 49(5), 1541-1578.
Lauricella, T. (2015, May 4). Fund fiend: Growth beats value. (If investors care.) As growth has pulled ahead, investors seem to have turned off the channel. The Wall Street Journal.
Lesser, K., Rößle, F., & Walkshäusl, C. (2016). Socially responsible, green, and faith-based investment strategies: Screening activity matters! Finance Research Letters, 16(C), 171-178.
Lettau, M., & Ludvigson, S. (2001). Resurrecting the (C) CAPM: A cross-sectional test when risk premia are time-varying. Journal of Political Economy, 109(6), 1238-1287.
Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. The Journal of Finance, 72(4), 1785-1824.
Lintner, J. (1965). Security prices, risk, and maximal gains from diversification. The Journal of Finance, 20(4), 587-615.
Maloney, T., & Moskowitz, T. J. (2021). Value and interest rates: Are rates to blame for value’s torments? The Journal of Portfolio Management, 47(6), 65-87.
Markowitz, H. (1952). The utility of wealth. Journal of Political Economy, 60(2), 151-158.
Moskowitz, T. J. (2000). Mutual fund performance: An empirical decomposition into stock-picking talent, style, transactions costs, and expenses: Discussion. The Journal of Finance, 55(4), 1695-1703.
Mossin, J. (1966). Equilibrium in a capital asset market. Econometrica, 34(4), 768-783.
Nofsinger, J., & Varma, A. (2014). Socially responsible funds and market crises. Journal of Banking & Finance, 48, 180-193.
Pastor, Ľ., & Stambaugh, R. F. (2000). Comparing asset pricing models: An investment perspective. Journal of Financial Economics, 56(3), 335-381.
Pastor, Ľ., & Vorsatz, M. B. (2020). Mutual fund performance and flows during the Covid-19 crisis. The Review of Asset Pricing Studies, 10(4), 791-833.
Pastor, Ľ., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550-571.
Petkova, R., & Zhang, L. (2005). Is value riskier than growth? Journal of Financial Economics, 78(1), 187-202.
Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The Journal of Finance, 19(3), 425-442.
Sharpe, W. F. (1966). Mutual fund performance. The Journal of Business, 39(1), 119–138.
Steen, M., Moussawi, J., & Gjolberg, O. (2020). Is there a relationship between Morningstar’s ESG ratings and mutual fund performance? Journal of Sustainable Finance & Investment, 10(4), 349-370.
Tobin, J. (1958). Liquidity preference as behavior towards risk. The Review of Economic Studies, 25(2), 65-86.
Treynor, J. L. (1965). How to rate management of investment funds. Harvard Business Review, 43(1), 63-75.
Treynor, J. L. (1961). Market value, time, and risk. Time, and Risk (August 8, 1961).
Wermers, R. (2000). Mutual fund performance: An empirical decomposition into stock-picking talent, style, transactions costs, and expenses. The Journal of Finance, 55(4), 1655-1695.
Zhang, L. (2005). The value premium. The Journal of Finance, 60(1), 67-103.
Published
Issue
Section
How to Cite
Research impact
Harvested 2026-09-22Counts differ between services because each indexes a different body of literature. None of them is the whole picture.
