Impact of COVID-19 on the performance of emerging market mutual funds: evidence from India

Abstract

AbstractThe purpose of this paper is to examine the widely believed beating capacity of actively managed funds during the market downturn. This popular hypothesis has been tested with the performance of Indian Equity Mutual Funds during the pandemic period. The conditional alphas are estimated using lagged instrumental variables with the fixed effect/LSDV estimator and the sys-GMM estimator in contrast to the OLS estimation from a sample of 1271 schemes for 5 months from 1st March 2020 to 31st July 2020. The study’s findings indicate that the actively managed Indian mutual fund co-moves with the market and does not possess the ability to beat the market. The major implication comes from the application of fixed effect and GMM estimators for the performance evaluation of Indian Mutual Funds’ during the crisis period, and it serves the investors in deciding the profitable investment opportunities.