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2013•Universiti Utara Malaysia Institutional Repository (Universiti Utara Malaysia)Requires access

Lipper's rating and unit trust performance in Malaysia

Ahmad Ridhuwan Abdullah, Nur Adiana Hiau Abdullah

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Abstract

This study examines the usefulness of rating information supplied by Lipper using a sample of 68 Malaysian unit trusts from December 2000 to November 2010.Four performance measures were used namely the Sharpe ratio, Treynor ratio, Jensen's alpha, and Fama and French 3-factor model.Overall, unit trusts underperformed the market index and risk free rate in 3-year, 5-year, and 10-year investment horizons except for the highest rated funds which were able to provide positive returns.Furthermore, the highest, second to highest and third to highest rated funds significantly outperformed the lowest rated funds especially in a longer investment horizon.This result indicated that Lipper rating system is useful in identifying the lowest to highest performance funds.

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What this paper is about

This study examines the usefulness of rating information supplied by Lipper using a sample of 68 Malaysian unit trusts from December 2000 to November 2010.Four performance measures were used namely the Sharpe ratio, Treynor ratio, Jensen's alpha, and Fama and French 3-factor model.Overall, unit trusts underperformed the market index and risk free rate in 3-year, 5-year, and 10-year investment horizons except for the highest rated funds which were able to provide positive returns.Furthermore, the highest, second to highest and third to highest rated funds significantly outperformed the lowest rated funds especially in a longer investment horizon.This result indicated that Lipper rating system is useful in identifying the lowest to highest performance funds.

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Available abstract

This study examines the usefulness of rating information supplied by Lipper using a sample of 68 Malaysian unit trusts from December 2000 to November 2010.Four performance measures were used namely the Sharpe ratio, Treynor ratio, Jensen's alpha, and Fama and French 3-factor model.Overall, unit trusts underperformed the market index and risk free rate in 3-year, 5-year, and 10-year investment horizons except for the highest rated funds which were able to provide positive returns.Furthermore, the highest, second to highest and third to highest rated funds significantly outperformed the lowest rated funds especially in a longer investment horizon.This result indicated that Lipper rating system is useful in identifying the lowest to highest performance funds.

Key concepts: Treynor ratio, Unit trust, Sharpe ratio, Investment (military), Actuarial science, Information ratio, Unit (ring theory), Index (typography)

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