Diversification benefits and persistence of US-based global bond funds

Sirapat Polwitoon, Oranee Tawatnuntachai

Research output: Contribution to journalArticle

16 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)2767-2786
Number of pages20
JournalJournal of Banking and Finance
Volume30
Issue number10
DOIs
StatePublished - Oct 1 2006

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Diversification benefits and persistence of US-based global bond funds'. Together they form a unique fingerprint.

  • Cite this