The Claim of Mutual Managers Of Having Efficient Portfolio Than Capital Market, Is It True?

Abstract

This study is about evaluating the level of risk in the returns of mutual funds in Pakistan. This study inherits pioneer characteristics because risk analysis has been done through traditional risk measures such as standard deviation, beta and alpha along with ARCH and GARCH models. The capital market portfolio, closed end mutual funds index and open end mutual funds index has been analyzed. The results show that capital market portfolio is more risky than open end mutual fund index. The results determined from statistical measures and ARCH and GARCH also show that closed end funds are more risky than open end and capital market. Mangers need to be more proactive to select superior stocks to avoid volatility in returns.

Key words: Mutual Funds, Risk, Volatility, ARCH, GARCH