TY - JOUR
T1 - Diversification benefits and persistence of US-based global bond funds
AU - Polwitoon, Sirapat
AU - Tawatnuntachai, Oranee
N1 - Funding Information:
We are grateful to the Editor and two anonymous referees for insightful suggestions. We wish to thank Shaw Chen, Gordon Dash, John Doukas, Ranjan D’Mello, Lawrence Kryzanowski, Beni Lauterback, Yul Lee, Eva Liljeblom, Edward Mazze, David Simon, Steve Sears, Timothy Tyrrell, Tong Yu and the participants of the 2001 European Financial Management Association’s Doctoral Seminar, 2005 European Financial Management, 2005 Asian Finance and 2005 Southwestern Finance Association Conferences for their helpful comments. We extend special thanks to Charlie Charoenwong, Kenneth Kim, Pattanaporn Kitsabunnarat and especially to Anchada Charoenrook for her untiring suggestions. We also would like to thank Southwestern Finance Association for the 2005 McGraw-Hill Distinguished Paper in Finance Award. Financial support from School of Business Administration at Penn State Harrisburg and Sigmund Weis School of Business at Susquehanna University is gratefully acknowledged.
PY - 2006/10
Y1 - 2006/10
N2 - This paper examines diversification benefits and performance persistence of 188 US-based global bond funds that survived and were defunct during the period of 1993-2004. Consistent with managed fund literature, global funds underperform broad-based benchmark indexes; however, the underperformance is less than the funds' expense ratio. The results using both simple and time-varying frameworks suggest that global funds provide higher total return and comparable risk-adjusted return to domestic bond funds. For US investors specializing in domestic bond funds, global funds can enhance return by 0.5-1% per year without increasing risk. Global funds also provide incremental diversification benefits to equity fund investors. The funds exhibit short-run performance persistence, but this is difficult for investors to exploit, especially in long-run. Global funds show no return seasonality during the sample period. On a risk-adjusted basis, larger and newer funds and funds with long maturity and low expense ratio perform well.
AB - This paper examines diversification benefits and performance persistence of 188 US-based global bond funds that survived and were defunct during the period of 1993-2004. Consistent with managed fund literature, global funds underperform broad-based benchmark indexes; however, the underperformance is less than the funds' expense ratio. The results using both simple and time-varying frameworks suggest that global funds provide higher total return and comparable risk-adjusted return to domestic bond funds. For US investors specializing in domestic bond funds, global funds can enhance return by 0.5-1% per year without increasing risk. Global funds also provide incremental diversification benefits to equity fund investors. The funds exhibit short-run performance persistence, but this is difficult for investors to exploit, especially in long-run. Global funds show no return seasonality during the sample period. On a risk-adjusted basis, larger and newer funds and funds with long maturity and low expense ratio perform well.
UR - http://www.scopus.com/inward/record.url?scp=33747431967&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=33747431967&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2005.10.003
DO - 10.1016/j.jbankfin.2005.10.003
M3 - Article
AN - SCOPUS:33747431967
SN - 0378-4266
VL - 30
SP - 2767
EP - 2786
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 10
ER -