RISK AND PERFORMANCE ANALYSIS OF MUTUAL FUND IN INDONESIA USING LOWER PARTIAL MOMENT (LPM2) METHOD AND MODIGLIANI-M2 CASE STUDY: FIXED INCOME MUTUAL FUND & EQUITY MUTUAL FUND

• Main Author: CAESAR RADJAWANE (NIM: 29106426), JULIO
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/12296
• Institution: Institut Teknologi Bandung

Higher return than traditional kind of investment, such as time deposit and savings, is the main reason of rapid growth of mutual fund, both from unit holders and asset under management. However, high return is always shaded by higher risk volatility than traditional investments. For years, risk is measured by statistical method, standard deviation, which is to calculate periodic return's fluctuation to rate of return. Standard deviation method assumes both upside risk and downside risk as a risk. For some investor, the real risk is when return given is less than their expected rate of return, or downside risk. High growth in risk calculation based on downside risk that reveals the truth risk of mutual fund's investment will provide essential aid both investment manager and investor to achieve either better return with lower level of risk or proper return should be gained by investor.<p>One of many approaches to calculate downside risk is Lower Partial Moment n-degree (LPM n-degree).n-degree can be considered as risk aversion coefficient (A) of the investor. The higher risk aversion coefficient level of a mutual fund, more risky can the mutual fund will be considered. In this thesis, for simplification purpose, LPM 2-degree or LPM2 is used. By understanding the level of real risk / downside risk, will lead to rate of return that should be bore by mutual fund. Simple Prospect method based on utility theory is used to determine the risk aversion coefficient (A).<p>Modigliani-M2 is a method used to assess mutual fund's performance. The distinguishable aspect in Modigliani-M2 measurement in performance of a mutual fund is it generates relative return to portfolio benchmark's risk for each mutual funds. M2 method is will effective in order to get unity in each mutual fund's risk calculation. This unity is a major assistance in each mutual fund's performance comparison.<p>Analysis on mutual fund's risk and performance will involve two kinds of mutual fund, which are Fixed Income Mutual Fund and Equity Mutual Fund. <br /> <br />