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How does oil market volatility impact mutual fund performance?

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posted on 2023-10-30, 12:12 authored by Bader Jawid Alsubaiei, Giovanni Calice, Andrew VivianAndrew Vivian

The aim of this paper is twofold. First, we investigate whether oil market volatility affects fund performance. Second, we examine whether oil volatility impacts fund managers' ability to select stocks and to time oil volatility. Our analysis is based on the Saudi Arabian market, a major developing economy and the world's largest oil producer. Our first main finding is that oil market volatility has a significant negative impact on mutual fund performance. Notably, this result holds robustly across all the volatility and performance measures applied in our analysis. Secondly, the risk-adjusted performance evidence suggests that high oil volatility reduces managers' stock selection ability. Further empirical analysis is consistent with the notion that skilled mutual funds are able to consistently generate alpha but evidence is mixed on whether they can improve performance by timing oil market volatility. Our study presents new evidence on a fast-growing emerging market and identifies important practical implications for the mutual fund industry which help investors, academics and regulators to better understand the functioning of this market.

History

School

  • Loughborough Business School

Published in

International Review of Economics & Finance

Volume

89

Issue

Part A

Pages

1601-1621

Publisher

Elsevier

Version

  • VoR (Version of Record)

Rights holder

© The Authors

Publisher statement

This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

Acceptance date

2023-08-24

Publication date

2023-08-29

Copyright date

2023

ISSN

1059-0560

eISSN

1873-8036

Language

  • en

Depositor

Dr Giovanni Calice. Deposit date: 4 September 2023

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