Investigating key funds characteristics influencing their investment performance in Saudi Arabia: A dynamic panel data approach

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The study examines if specific characteristics of funds influence the performance of Saudi equity mutual funds. Previous research has explored various aspects of mutual funds. However, the Saudi Arabia literature focuses on evaluating the funds’ performance. Hence, this study seeks to close this gap by providing a framework to explain the equity fund performance. Several risks adjusted performance measures are applied such as Jensen’s alpha, lower partial moment alpha, Sharpe ratio, LPM-Sharpe ratio using the dynamic panel specification over the period 2010–2019. Based on the LPM alpha, the risk-adjusted return analysis reveals that the Saudi equity funds outperformed their benchmark over the full sample period. The empirical results show that major fund-specific characteristics such as fund size, past performance, and flow explain future performance. Besides, the evidence confirms that Saudi funds benefit from the economies of scale and expertise, while funds requiring higher levels of initial investment tend to exhibit lower performance levels. These findings provide investors and fund managers with useful information to make the optimal investment decisions in the mutual fund industry.

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    • Table 1. Descriptive statistics on mutual fund-specific characteristics and subsample fund return distribution
    • Table 2. Summary statistics on performance measurement by fund groups
    • Table 3. Correlation matrix and variance inflation factor
    • Table 4. Influence of fund-specific factors on future performance for the full sample
    • Table 5. Influence of fund-specific factors on future performance for the two subsamples: Growth funds/Income & growth funds
    • Conceptualization
      Samira Ben Belgacem
    • Data curation
      Samira Ben Belgacem
    • Investigation
      Samira Ben Belgacem, Wafa Ghardallou
    • Methodology
      Samira Ben Belgacem, Razan Alshebel
    • Resources
      Samira Ben Belgacem, Wafa Ghardallou, Razan Alshebel
    • Supervision
      Samira Ben Belgacem
    • Validation
      Samira Ben Belgacem, Razan Alshebel
    • Writing – review & editing
      Samira Ben Belgacem
    • Software
      Wafa Ghardallou, Razan Alshebel
    • Visualization
      Wafa Ghardallou
    • Writing – original draft
      Wafa Ghardallou, Razan Alshebel