Determining the risk-adjusted economic value-added in the average return performance of the selected equity funds in the Philippines from the 1st quarter of 2001 to the 1st quarter of 2005

• Main Authors: Hoang, Thai Dang, Uy, Lourdes Christine M., Yao, Katrina Lorraine Y.
• Format: text
• Language: English
• Published: Animo Repository 2005
• Subjects: Equity > Philippines; Investments > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18341
• Institution: De La Salle University

The main objective of this study was to determine the risk-adjusted economic value-added given to investors by their equity funds when these funds outperformed the market. As popularly known, investment in equity fund is the riskiest type of investment but it generates higher additional return to compensate for the high level of risk. Being an active trader in the stock market to take potential profit, equity fund is able to beat the market on its investment return but its expense account is also large. This study aimed to find out whether the excess return made by the equity fund was high enough not only to pay off the additional expense but also compensate for the high level of risk. The Sharpe's ratio was a useful method to estimate the risk-adjusted economic value-added in this study. The results provided by Sharpe's ratio in the chapter of data analysis proved that there was risk-adjusted economic value-added existing in four equity funds in the Philippines since the SNR to SGR ratio of outperformance was greater than SNR to SGr ratio of underperformance. The outperformance of Philequity and United Fund generated a return high enough to cover the expenses and to satisfy investors for the level of risk that they were willing to bear. On the other hand, Sunlife and Philam did not satisfy their investors because they generated a lower additional net return than additional risk. Based on the findings, Philequity Fund, Inc. was the best performer among the four selected equity funds because the fund offered its investors the highest additional net return per additional risk.