Does Fund Size Matter: An Analysis of Small and Large

Mutual funds have become a staple for retirement savings and have received much research attention. Bond funds, though, have received little attention to date, and the effects of fund size on performance are still in dispute. Using cross sectional and time series regression analysis, the performance of high yield and corporate bond funds are contrasted, with potential causes for the differences identified. A few fundamental economic variables are found to explain a large portion of fund returns. Bond index returns are found to have the greatest impact of any variable on fund returns, with the most pronounced effect on large corporate bond funds. The impact of fund size on performance is also examined, with evidence suggesting that after a point fund returns are negatively impacted as net assets grow. This poses a key microeconomic question regarding the benefits and costs of fund scale

Would the addition of bond or equity funds make M2 a better indicator of nominal GDP?

John Duca assesses the possibility that adding bond mutual funds, equity mutual funds, or both to M2 would improve this monetary aggregate's ability to forecast nominal GDP growth. He finds that M2B (M2 plus bond funds) and M2+ (M2 plus bond and stock funds) are statistically significant in explaining past nominal GDP growth. Duca further shows that M2B and M2+ each yield better forecasts of nominal GDP growth since 1990 than does M2, but to a lesser extent when the federal funds rate and the ten-year Treasury note yield are included in his forecasting model. Because bond and equity mutual funds are less directly influenced by the Federal Reserve than M2, Duca cautions that, relative to M2, M2B and M2+ are likely to be less controllable by the Federal Reserve. ; Given these findings, Duca argues that M2B and M2+ show promise as information variables that the Federal Reserve may use along with other economic indicators in setting monetary policy. Recent forecast results and anecdotal information suggest that if equity funds continue to become more substitutable for nontransactions deposits, M2+ may prove to be increasingly helpful in this capacity.Gross domestic product ; Money supply

Institutional Herding in Bond Markets

Recent research has shown that institutional herding is a relevant phenomenon in stock markets. Do institutional investors also follow each other in bond markets? This paper focuses on the German bond market and uses data from 57 German mutual funds that invest mainly in DM-denominated bonds, which represents 71% of the total market volume. Due to the variety and large number of bonds that exist, we do not expect mutual funds to herd with regard to separate bonds. We believe instead that bonds with the same characteristics such as interest rate, maturity, collateral, or issuer are considered to be equivalent by institutional investors. Consequently, we construct "bond groups" consisting of similar bonds and analyze herding at a "bond group" level. Our results indicate that there is strong evidence of herding, albeit it is weaker than in stock markets. Further analysis suggests that mutual funds do not place an equal weight on different bond characteristics. Nominal interest rates appear to be most important in the bond selection process. --Mutual Funds,Herding,Imitation,Coordination,Behavioral Finance

A comparison between Islamic and conventional bond fund’s performance in Malaysia

The main objective for an investment is to curb inflation. Unit trust is one of common investment vehicle in Malaysia. The main purpose of this study is to compare the performance analysis on Islamic bond funds and Conventional bond funds in Malaysia. The performance of both funds was analyzed over a period of 48 months commencing from January 2011 to December 2014. The monthly returns of 20 bond funds, being 10 Islamic bond funds and 10 Conventional bond funds are extracted from Morningstar system. Performance of unit trust always influenced by risk and return. In this research, the fund performances are evaluated by using six performance measures namely mean return, standard deviation, beta, Treynor index, Sharpe index and Jensen index. The results of this study suggest that Islamic Bond Funds are outperformed the Conventional bond funds during the period of study. On the other hand, Conventional bond funds seem to have a lower risk than Islamic bond funds. Nevertheless, when both funds are compared by using t-Test and ANOVA, results displayed Islamic bond funds and Conventional bond funds have no difference in fund‟s performance. The findings are highly relevant to investors as well as fund manager

Does More Government Deficit Lead to a Higher Long-term Interest Rate? Application of an Extended Loanable Funds Model to Estonia

Applying and extending the open-economy loanable funds model, this article shows that more government borrowing or debt as a percent of GDP leads to a higher government bond yield, that a higher real money market rate, a higher expected inflation rate, a higher EU government bond yield, or depreciation of the Estonian kroon (EEK) would increase the Estonian government bond yield, and that the negative coefficient of the percent change in real GDP has an unexpected sign. When the conventional closed-economy or openeconomy loanable funds model is considered, the article finds that more government borrowing as a percent of GDP does not result in a higher government bond yield, that the positive coefficients of the real money market rate, the growth rate of real GDP, and the expected inflation are significant at the 1%, 5% or 10% level, and that the negative coefficient of the ratio of the net capital inflow to GDP in the conventional open-economy loanable funds model is significant at the 1% level.government deficits, long-term interest rates, loanable funds model, expected inflation, world interest rates, exchange rates

Islamic Finance and the Theory of Capital Structure

This paper empirically investigates firms using Islamic finance in Malaysia and Middle East countries. The comparative analysis of Islamic finance and non-Islamic finance users resulted in three major implications. First, Islamic bond issuers preferentially choose the Islamic bond issuance prior to bank borrowing and other external financing tools. Second, Islamic bond issuance is not related to the issuer’s internal funds, while Islamic bank borrowing is significantly influenced by the magnitude of a firm’s internal funds. These results suggest that Islamic bond issuers do not always choose to issue bonds based on information cost, but Islamic bank borrowers always do. Third, the Islamic bond issuance contributes to an increase in the issuer’s stock returns and total factor productivity. This empirical result suggests that Islamic bond issuance is preferred because of this unique benefit which standard external financing does not have.Capital Structure, Bond Issuance, Islamic Finance

Academic Building Revenue Bond Funds, June 30, 2002

State University Audit Repor

The global growth of mutual funds

With few exceptions, mainly in Asia, mutual funds grew explosively in most countries around the world during the 1990s. Equity funds predominated in Anglo-American countries while bond funds predominated in most of Continental Europe, and in middle-income countries. Capital market development (reflecting investor confidence in market integrity, liquidity, and efficiency) and financial system orientation were the main determinants of mutual fund growth. Restrictions on competing products acted as a catalyst for the development of money market and (short-term) bond funds.Payment Systems&Infrastructure,Economic Theory&Research,Financial Intermediation,International Terrorism&Counterterrorism,Non Bank Financial Institutions,Economic Theory&Research,Financial Intermediation,Non Bank Financial Institutions,Infrastructure Finance,Infrastructure Finance

Report of the Academic Building Revenue Bond Funds of Iowa State University of Science and Technology as of and for the year ended June 30, 2008

Report of the Academic Building Revenue Bond Funds of Iowa State University of Science and Technology as of and for the year ended June 30, 200

An Excursion into the Statistical Properties of Hedge Funds

This paper provides an overview of the most important statistical properties of individual hedge fund returns. We find that the net-of-fees monthly returns of the average individual hedge fund exhibit significant degrees of negative skewness, excess kurtosis, as well as positive first-order serial correlation. The correlations between hedge funds in the same strategy group are of the same order of magnitude as the correlations between funds in different strategy groups and relatively low. Only 10-20% of the variation in the average individual hedge fund’s returns can be explained by what happens in the US equity and bond markets. Compared to individual funds, portfolios of hedge funds tend to exhibit lower skewness, higher serial correlation and higher correlation with stocks and bonds. Movements in the US equity and bond markets still only explain 20-40% of the variation in hedge fund portfolios returns though. Finally, an equally-weighted portfolio of all funds in our sample offers a 2.76% higher mean return than the average fund of funds. This strongly suggests that the timing and fund picking activities of the average fund of funds are not rewarded by a higher return.