Performance evaluation models applied to the Brazilian mutual funds market

Abstract

PurposeThis paper analyzes alternative performance evaluation models applied to equity mutual funds under conditional and unconditional approaches in the Brazilian market.Design/methodology/approachThe analysis is conducted using CAPM's single factor, Fama–French three and five factors, under their conditional and unconditional versions in a sample of 896 equity mutual funds from 2008 to 2019.FindingsThe results suggest that the use of three- or five-factor models is especially relevant to reduce the effect of market anomalies in performance assessment. Additionally, results show that conditional approaches, adding time-varying alphas and betas with macroeconomic variables, provide higher explanatory power than their unconditional peers.Originality/valueThe results are relevant in the unique economic environment characterized by historically high interest rate and high market volatility.