EQUITY FUND PERFORMANCE AND SECTOR DIVERSIFICATION

Mihovil Anđelinović; Ana Pavković; Livija Valentić

doi:10.20472/ES.2020.9.1.002

Authors

Mihovil Anđelinović Faculty of Economics and Business, University of Zagreb, Croatia Author
Ana Pavković Faculty of Economics and Business, University of Zagreb, Croatia Author
Livija Valentić Faculty of Economics and Business, University of Zagreb, Croatia Author

DOI:

https://doi.org/10.20472/ES.2020.9.1.002

Keywords:

Asset liability management, Equity funds, Sector diversification, Panel data model, Croatia

Abstract

This paper examines the performance of equity funds in relation to the diversification of their portfolios. The main objective of the research is to determine how the allocation of investments across individual sectors affects the returns of equity funds in the Republic of Croatia. Six selected equity funds invested more than 50% of their assets in sectors within the Republic of Croatia. An unbalanced dynamic panel model is estimated for the period from January 2012 to August 2017. Investment in tourism and industry proved to be the most significant and has a positive effect on fund returns, whereas a significant negative impact was found in consumer goods, funds and conglomerates, and the state sector. The macroeconomic environment was also analyzed to place the conclusions of the econometric analysis in the appropriate context. The empirical results suggest that portfolio managers should pay more attention to macroeconomic conditions and trends in economic sectors if they want to achieve higher returns.

Data:
Received: 18 Mar 2020
Revised: 9 May 2020
Accepted: 6 Jun 2020
Published: 20 Jun 2020