AN EMPIRICAL ANALYSIS OF FUNDS’ ALTERNATIVE MEASURES IN THE DRAWDOWN RISK MEASURE (DRM) FRAMEWORK

  • Mohammad Reza Tavakoli Baghdadabad
  • Fauzias Mat Nor
  • Izani Ibrahim

Abstract

This paper aims to evaluate the risk-adjusted performance of Malaysian mutual funds using the modified
performance evaluation ratios by the drawdown risk measure (DRM) based on modern portfolio theory, and to
represent the results in a manner which is easily understood by the average investors and portfolio managers. It
evaluates the performance of 91 Malaysian mutual funds using risk-adjusted returns over the 2000-2011. The
DRM, as a different measure from downside risk, is applied to improve seven risk-adjusted performance
measures of Sharpe, Treynor, M-squared, Jensen’s alpha, information ratio (IR), MSR, and FPI. It proposes a
new single-factor model to estimate the drawdown beta and alpha in the DRM framework. This paper is the first
study to estimate a new regression model in the DRM framework to evaluate the performance of Malaysian
mutual funds. The evidence shows that replacement framework in terms of MDB, the drawdown beta, and the
drawdown CAPM can be replaced to the conventional frameworks in terms of MVB, beta, and the CAPM and also
MSB, downside beta, and D-CAPM to modify seven performance evaluation measures of Malaysian mutual
funds.
Published
2011-12-15
How to Cite
TAVAKOLI BAGHDADABAD, Mohammad Reza ; MAT NOR, Fauzias ; IBRAHIM, Izani . AN EMPIRICAL ANALYSIS OF FUNDS’ ALTERNATIVE MEASURES IN THE DRAWDOWN RISK MEASURE (DRM) FRAMEWORK. Journal of Advanced Studies in Finance, [S.l.], v. 2, n. 2, p. 149-167, dec. 2011. ISSN 2068-8393. Available at: <https://journals.aserspublishing.eu/jasf/article/view/51>. Date accessed: 05 july 2022.
Section
Journal of Advanced Studies in Finance