Cross-Sectional Alpha Dispersion of Investment Funds and Performance Evaluation; Is There a Connection? (Evidence from an Emerging Market)

The investment decisions of managers of investment funds (especially equity investment funds) have an impression on the returns of individuals who have deposited their capital in these funds. Therefore, the issue of evaluating the performance of investment funds and their managers is imperative for investors. The purpose of research is to investigate the effect of cross-sectional alpha dispersion on investors' evaluation of the performance of investment funds. To this end, the information of ۳۱ equity investment funds during ۲۰۱۲ till ۲۰۲۲ were extracted and the interquartile ratio of Jensen's alpha called “IQR” as well as “Performance-Flow Sensitivity” were calculated along with control variables. Then, the hypothesis test model was fitted using the multivariate regression analysis through Generalized Least Squares method. Empirical findings showed a negative and significant connection between the alpha dispersion of investment funds and performance-flow sensitivity. Based on the results, one credit increase in the standard deviation of alpha dispersion leads to a decrease of about ۰.۴% in the ratio of performance-flow sensitivity. Environments with high alpha dispersion of investment funds, will targeted by unskilled managers to introduce themselves as successful and skilled managers to investors and mislead them. Therefore, when the alpha of investment funds has a higher dispersion, the type I error possibility investors will face, increases. Is such environments, individuals may consider an inefficient manager as a competent and skilled one. We will provide some suggestions in this regard.

کلیدواژه ها:

investment funds ، Performance Evaluation ، bayesian model ، Jensen' s alpha ، Behavioral models