Another Look in Conditioning Alphas on Economic Information: Indian Evidence

Abstract

No doubt, Jensen measure is path breaking in the field of investment performance, particularly in stock selection. A large number of Indian researchers have evaluated stock-selection performance of mutual fund managers by using the traditional measure of Jensen and have reported a mixed result. If we think differently, then we can see that the conditional measure provides better performance when compared with the traditional Jensen measure. In India, the performance evaluation of mutual fund based on conditional measure is scanty, while other developed economies have extensively examined the conditional performance and depicted superior results. Therefore, this study makes an attempt to evaluate stock-selection performance of open-ended equity mutual fund managers based on the conditional model and makes a comparison between the traditional model (unconditional) and the conditional model. The finding of the present study is remarkable. After the inclusion of the available public information in the conditional model, the significant stock-selection performance is increased and the alpha values in all cases are improved when compared with the unconditional model. Finally, the statistical test implies that there is significant difference between the two measures in respect of stock-selection performance.