LITERATURE REVIEW Literature on mutual fund performance evaluation is enormous.

A few research studies that have influenced the preparation of this paper substantially are discussed in this section. Sharpe, William F. (19 ! su""ested a measure for the evaluation of portfolio performance.

#rawin" on results obtained in the field of portfolio analysis, economist $ac% L. &reynor has su""ested a new predictor of mutual fund performance, one that differs from virtually all those used previously by incorporatin" the volatility of a fund's return in a simple yet meanin"ful manner. (ichael ). $ensen (19 *! derived a ris%+ad,usted measure of portfolio performance ($ensen-s alpha! that estimates how much a mana"er-s forecastin" ability contributes to fund-s returns. As indicated by Statman (.///!, the e S#A0 of a fund portfolio is the e1cess return of the portfolio over the return of the benchmar% inde1, where the portfolio is levera"ed to have the benchmar% inde1-s standard deviation. S.2arayan 0ao , et. al., evaluated performance of 3ndian mutual funds in a bear mar%et throu"h relative performance inde1, ris%+return analysis, &reynor-s ratio, Sharpe-s ratio, Sharpe-s measure , $ensen-s measure, and Fama-s measure. &he study used . 9 open+ended schemes (out of total schemes of 455! for computin" relative performance inde1. &hen after e1cludin" funds whose returns are less than ris%+free returns, 67 schemes are finally used for further analysis. &he results of performance measures su""est that most of mutual fund schemes in the sample of 67 were able to satisfy investor-s e1pectations by "ivin" e1cess returns over e1pected returns based on both premium for systematic ris% and total ris%. 8i,an 0oy, et. al., conducted an empirical study on conditional performance of 3ndian mutual funds. &his paper uses a techni9ue called conditional performance evaluation on a sample of ei"hty+nine 3ndian mutual fund schemes .&his

paper measures the performance of various mutual funds with both unconditional and conditional form of )A:(, &reynor+ (a;uy model and <enri%sson+(erton model. &he effect of incorporatin" la""ed information variables into the evaluation of mutual fund mana"ersperformance is e1amined in the 3ndian conte1t. &he results su""est that the use of conditionin" la""ed information variables improves the performance of mutual fund schemes, causin" alphas to shift towards ri"ht and reducin" the number of ne"ative timin" coefficients. (ishra, et al., (.//.! measured mutual fund performance usin" lower partial moment. 3n this paper, measures of evaluatin" portfolio performance based on lower partial moment are developed. 0is% from the lower partial moment is measured by ta%in" into account only those states in which return is below a pre+specified =tar"et rate> li%e ris%+free rate. ?shama Fernandes(.//5! evaluated inde1 fund implementation in 3ndia. 3n this paper, trac%in" error of inde1 funds in 3ndia is measured .&he consistency and level of trac%in" errors obtained by some well+run inde1 fund su""ests that it is possible to attain low levels of trac%in" error under 3ndian conditions. At the same time, there do seem to be periods where certain inde1 funds appear to depart from the discipline of inde1ation. ?. :endara%i et al. studied construction of mutual fund portfolios, developed a multi+ criteria methodolo"y and applied it to the @ree% mar%et of e9uity mutual funds. &he methodolo"y is based on the combination of discrete and continuous multi+criteria decision aid methods for mutual fund selection and composition. A&A#3S multi+criteria decision aid method is employed in order to develop mutual fund-s performance models. @oal pro"rammin" model is employed to determine proportion of selected mutual funds in the final portfolios.

Ba%ri C.8ello (.//6! matched a sample of socially responsible stoc% mutual funds matched to randomly selected conventional funds of similar net assets to investi"ate differences in characteristics of assets held, de"ree of portfolio diversification and variable effects of diversification on investment performance. &he study found that socially responsible funds do not differ si"nificantly from conventional funds in terms of any of these attributes. (oreover, the effect of diversification on investment performance is not different between the two "roups. 8oth "roups underperformed the #omini 4// Social 3nde1 and S D : 6// durin" the study period.