Mutual funds herding and its influence on stock

EFFECTIVE INVESTMENT

DECISION IN MUTUAL

FUNDS.

Mutual funds herding and its

influence on stock returns.

Mutual funds performance

evaluation.

Group members

1. Bahrawar said

2. faisal shehzad

supervisor

Dr Bakhtiar Ali

Introduction to the study

Research objectives:

1. to investigate the herding behavior of investors

in

different situations.

2. Performance evaluation of mutual Funds in

Pakistan.

3. Evaluation of the risk and return from the

individual fund.

Research questions:

1. How herding behavior be measurable?

2. Does mutual funds herding has significant

impact on stock return?

3. How we can evaluate the mutual funds

performance in pakistan in past few years?

4. How risky are the funds involved in

comparison to return?

introduction

A mutual fund is an entity that pools the money

of many investors to invest in different

securities. Investments may be in shares, debt

securities, money market securities or a

combination of all these.

Flow chart of M.F

types

Open end funds:

Depends on demand, buying and selling, IPO.

Close end funds:

Restricted, limited, buying and selling.

Herding definitions

Nofsinger and Sias (1999),

1.Group, same direction, same time.

2. A herd instinct relate to situations in which

individuals gravitate to the same investments,

based only on the fact that many others are

investing in those stocks.

Fear of regret.

History of mutual funds

M.F was first introduced in USA in 1940, now has 14000 M.F worth of nine trillion dollars.

Europe has 30,000 investment of 6 trillion dollars.

Asia included 11000 has investment of 2 trillions.

Africa M.F included 52 billion dollars.

Pakistan M.F have worth of 150 billion rupees.

M.F industry was first introduced by government in 1962 in form of NIT.

NIT is the largest M.F has almost 70 billion rupees.

Gap analysis

Focus at research on the financial markets after

2008 financial crises.

Lehman brother’s positive correlation in mutual

funds.

recently no study has been conducted in Pakistan

evaluating performance.

Performance is the major indicator in the decision

making.

Literature review:

1. Anna Mitsios (2006),

investigate intraday herding in wide market

and industry in austrilian equity

markets.

2. Tingyu Zo and Neng La, hong kong (2007),

separate stock in two portfolios, property

versus non property stocks.

3. Scharfistine and stein (1990). Studied

intentional and unintentional herding.

4. Ching li and tan (2010).

Examined herding in aggregate market of

share investor ‘A’ and share investor ‘B’.

5. Glesona mathrub and Peterson (2004).

Analyzed herding in higher markets

moments.

6. Shoo and sun(2010).

Studied institutional investors behavior.

Literature review

Literature review

Nadine Gatzerts et.al 2013,

Andrea et.al. 2014,

C.Edward et.al. 2012,

M Reza et.al.2010,

performance and risk as a major factor in

MFs.

Others, hummaira et.al.2012,

Aamir shah et.al. 2005, obtained results by

performance evaluation.

Theoretical Framework

Effective

investment

decisions in M.F

Mutual funds

herding

Performance

evalaution

Research Design

Pooled variance techniques.

Regression model.

Descriptive statistics.

ANOVA.

Hypothesis. H1 (-), H2 (+)

Research design

Performance is measured with the following

models;

Sharpe ratio

Treynor ratio

Jensen alpha

Sharpe ratio

Treynor ratio

Jensen differential

Research design

Population:

ISE, Data collection from secondary sources;

Annual reports , Asset management companies, stock exchanges, SECP and related sites.

NAV of close and open end MF has taken.

Business recorder.

Sample:

Twenty companies mutual funds.

Adaptive study.