Comparing the return on portfolios of unit trusts in malaysia using follow-the-winner and buy-and-hold strategy
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Date
2007
Authors
Salleh, Sobri
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Abstract
This study examines the performances of unit trusts in Malaysia over the period of 2001
until 2006. Performance is analyzed from the main perspectives of raw return and risk
adjusted return based on Edge-Lipper's winner list. Edge-Lipper publishes yearly list of
the winner funds based of various categories according to their custom-made criteria. The
main objectives of this study is to look into a simple strategy that naive unit trust
investors in Malaysia can used to maximize their return by buying a portfolio of unit
trusts with different categories. Performances differences between Conventional and
Islamic based unit trust is compared using the two strategies. Performance differences
based on follow-the-winner and buy-and-hold strategy is analyzed using Raw Return,
Treynor index and Sharpe ratio based on different risk categories of investors. Investor's
investment horizon was also taken into account during the analysis. Overall findings of
the analyses indicate that follow-the-winner strategy produced better return as compared
to buy-and-hold. This strategy works particularly well with the conventional units trust.
There are limitations in this study due to the limited number of unit trusts that belong to
the Edge-Lipper's winner list and the short time frame of the period under study. The
findings from this study can facilitate naive unit trust investors to apply a simple strategy
in order to maximize returns on their unit trust investment.