To conclude, in this chapter, we firstly provide a brief introduction to UK asset
management industry and its latest trend. Secondly, we explain the differences
between UK unit trusts and OEIC as well as the fact that unit trust has recently lost its
popularity mainly because of its complicated make-up. Although there are thousands
of them still, they have now been superseded by OEICs which were devised in
Europe. Thirdly, we explain the dataset we use in the thesis. We apply an ADF test to
examine the stationarity of the fund prices and the returns. Our results suggest that the
fund prices are not stationary, but after the first-differencing, general, income and
growth fund returns become stationary. The descriptive results suggest that live
only exception that dead growth funds outperformed surviving growth funds on
average.
In the following chapters, we will investigate different aspects of the UK unit trust
performance based on the dataset discussed. We start with a chapter providing a
literature survey, descriptions of research questions and issues, methodologies
employed, empirical results entailed in previous research. Chapter 3 examines the
small sample properties of the GMM iterated and 2-Step estimators within the
framework of the SDF primitive efficient models. Based on the results from the
simulation tests, the optimal method of estimation is employed to evaluate UK unit
trusts’ performance, with a special focus on the role of conditioning information on
performance evaluation in Chapter 4. Relative performance according to different
fund styles will be investigated in Chapter 5, aiming also at identifying a winning
style-rotation strategy. Chapter 6 examines the persistence of fund performance.
APPENDIX CHAPTER 1
TABLE 1-1 DATA DETAILS OF RECENT STUDIES OF UK UNIT TRUST PERFORMANCE
The paper Period and funds
coverage
The data details The return calculation
Fletcher (1997) 120 Trusts 1981-1989
Monthly offer prices (Money management)
Dividend information and ex- dividend dates ( Extel UK Dividend and Fixed interest Record) ;One month treasury bill ( DataStream) Monthly Returns based on offer prices Blake & Timmermann(1998) 2300 funds 02.1972—06. 1995
Micropal Ltd. Net Monthly returns using bid prices and net income D. E Allen (1999) 131 funds
1989--1995
DataStream Closing price
Quigley & Sinquefield (2000)
1978--1997 S&P Micropal (Micropal)
database The same as B&T. Expenses: 1.35% TERs Charles River Associates Limited (2002) 942 funds (508 alive & 434 dead) 1981--2001
S&P Micropal; Dead fund (Quigley and Sinquefield 1998) Money Management
(1998—2001)
Fletcher &Forbes (2002, 2004)
253 trusts
1982---1996 Offer Prices (Finstat managed fund database: FT Business information Service and Money Management; Dividends
(Finstat & Extel U.K. Dividend and Fixed Interest Record.);1- month U.K. Treasury bill returns (LSPD)*;Trading costs: C,E&K **;Investment
objective, annual &load charge (Unit Trust Yearbook)
Returns based on offer prices and dividend (Gross of the load charge and trading costs but net of the management charge.)
*: London Business School Share Price Database
**Chalmers, J.M.R.,Edelen, R.M.and G.B. Kadlec, 2001, Fund returns and trading expenses: Evidence on the value of active fund management, working paper, University of Pennslvania.
TABLE 1-4. THE RETURNS OF LIVE GENERAL FUNDS
This table reports the descriptive results (mean, median, maximum, minimum, standard deviation, skewness and kurtosis) of 13 general-fund returns based on monthly data from Jan 1975 to Oct 2003. ‘Average’ refers to the statistics of average returns of the general funds.
1 2 3 4 5 6 7 8 9 10 11 12 13 Average Mean 0.85% 0.92% 1.15% 1.11% 0.93% 1.08% 1.38% 1.07% 1.03% 1.03% 1.09% 0.98% 1.10% 1.06% Median 0.86% 0.18% 1.33% 1.58% 1.30% 1.17% 1.79% 1.02% 0.40% 1.29% 1.27% 1.03% 0.22% 1.33% Maximum 31.86% 40.26% 21.80% 25.34% 34.22% 38.71% 27.87% 28.61% 42.91% 35.83% 42.28% 45.38% 41.15% 32.68% Minimum -20.80% -28.29% -23.54% -30.13% -27.71% -25.29% -24.59% -23.24% -30.40% -29.22% -26.98% -26.04% -27.32% -26.31% Std. Dev. 0.058 0.052 0.048 0.049 0.053 0.052 0.055 0.053 0.054 0.054 0.055 0.055 0.052 0.049 Skewness 0.003 0.788 -0.234 -0.320 0.177 1.009 -0.238 0.305 0.914 0.260 0.800 1.165 0.943 0.303 Kurtosis 6.060 13.597 5.757 8.593 8.771 13.201 6.646 6.611 14.749 9.945 12.309 14.590 14.452 10.228 No. of Observation: 345
TABLE 1-5. THE RETURNS OF LIVE GROWTH FUNDS
This table reports the descriptive results (mean, median, maximum, minimum, standard deviation, skewness and kurtosis) of 11 growth-fund returns based on monthly data from Jan 1975 to Oct 2003. ‘Average’ refers to the statistics of average returns of the growth funds.
1 2 3 4 5 6 7 8 9 10 11 Average Mean 0.95% 1.24% 1.13% 0.94% 1.31% 1.01% 0.98% 1.06% 1.04% 1.13% 0.89% 1.06% Median 1.21% 1.68% 1.30% 0.76% 1.52% 0.00% 1.00% 1.48% 1.20% 1.20% 1.27% 1.47% Maximum 25.19% 24.03% 16.72% 21.67% 25.93% 18.78% 19.29% 21.43% 41.46% 39.48% 21.49% 20.98% Minimum -37.07% -27.63% -25.87% -20.77% -29.10% -31.69% -23.16% -24.08% -30.07% -32.47% -32.38% -28.44% Std. Dev. 0.054 0.050 0.047 0.058 0.051 0.047 0.045 0.049 0.056 0.057 0.053 0.046 Skewness -0.413 -0.392 -0.530 -0.216 -0.415 -0.498 -0.334 -0.359 0.862 0.287 -0.715 -0.522 Kurtosis 10.476 6.664 5.638 4.735 8.147 9.970 5.944 5.506 13.694 11.145 7.917 8.307 No. of observation: 345
TABLE 1-6. THE RETURNS OF LIVE INCOME FUNDS
This table reports the descriptive results (mean, median, maximum, minimum, standard deviation, skewness and kurtosis) of 16 Income-fund returns based on monthly data from Jan 1975 to Oct 2003. ‘Average’ refers to the statistics of average returns of the income funds.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Average Mean 0.87% 1.29% 0.85% 1.27% 0.95% 1.08% 1.40% 1.37% 0.99% 0.73% 1.28% 1.18% 0.88% 1.83% 1.41% 1.18% 1.05% Median 1.06% 0.31% 1.14% 1.69% 0.96% 1.42% 1.32% 1.47% 1.25% 0.92% 1.15% 1.01% 1.21% 1.84% 1.32% 1.26% 1.25% Maximum 30.85% 20.77% 14.47% 36.19% 33.33% 30.52% 44.86% 36.41% 27.85% 11.36% 19.33% 18.82% 22.91% 44.59% 27.27% 15.54% 23.95% Minimum -26.99% -27.35% -23.79% -24.92% -25.97% -21.47% -26.03% -23.10% -21.79% -22.25% -18.24% -29.31% -83.19% -30.68% -23.78% -24.73% -24.07% Std. Dev. 0.049 0.049 0.038 0.049 0.050 0.044 0.052 0.051 0.049 0.036 0.049 0.064 0.077 0.062 0.056 0.055 0.044 Skewness -0.023 -0.239 -0.667 0.434 0.243 0.171 1.256 0.529 0.155 -1.034 -0.073 -0.585 -5.052 0.827 0.136 -0.445 -0.210 Kurtosis 9.506 7.402 7.922 10.965 9.323 9.647 17.057 9.584 6.621 7.619 4.871 5.969 57.061 13.533 5.969 5.137 7.840
No. of observation: 345 (from Jan 1975 to Oct 2003)
TABLE 1-7. THE RETURNS OF DEAD GENERAL FUNDS VS LIVE FUNDS
This table reports the descriptive results (mean, median, maximum, minimum, standard deviation, skewness and kurtosis) of 12 dead general fund returns based on monthly data from 01/01/1975 to 09/01/1997. ‘Average Dead’ refers to the statistics of average returns of the dead general funds from 01/01/1975 to 09/01/1997. ‘AverageGeneral’ refers to for the same period, the statistics of average returns of the general funds which survived from Jan 1975 to Oct 2003.
1 2 3 4 5 6 7 8 9 10 11 12 AverageDead AverageGeneral Mean 1.18% 1.29% 1.31% 1.13% 1.02% 1.30% 1.25% 1.27% 1.39% 1.67% 1.50% 1.50% 1.32% 1.42% Median 1.26% 1.37% 1.34% 1.26% 1.53% 1.45% 1.62% 1.15% 1.68% 1.64% 1.39% 1.50% 1.64% 1.66% Maximum 28.38% 30.98% 31.75% 29.55% 24.03% 29.91% 21.35% 34.85% 30.47% 28.71% 26.27% 19.68% 26.35% 32.68% Minimum -28.59% -26.83% -26.30% -23.41% -93.63% -24.50% -23.76% -25.68% -28.79% -28.46% -28.53% -23.67% -26.21% -26.31% Std. Dev. 0.055 0.055 0.056 0.055 0.080 0.054 0.053 0.055 0.055 0.063 0.061 0.051 0.053 0.053 Skewness -0.078 0.196 0.252 0.229 -6.164 0.227 -0.228 0.451 -0.038 0.003 -0.104 -0.409 -0.127 0.360 Kurtosis 7.869 8.338 8.167 6.753 75.345 7.273 5.520 9.721 8.714 6.193 6.180 5.947 7.240 9.933
TABLE 1-8. THE RETURNS OF DEAD GROWTH FUNDS VS LIVE FUNDS
This table reports the descriptive results (mean, median, maximum, minimum, standard deviation, skewness and kurtosis) of 5 dead growth fund returns based on monthly data from 01/01/1975 to 10/01/1995. ‘Average Dead’ refers to the statistics of average returns of the dead income funds from 01/01/1975 to 12/01/1996. ‘Average Income’ refers to for the same period, the statistics of average returns of the growth funds which survived from Jan 1975 to Oct 2003.
1 2 3 4 5 AverageDead AverageGrowth Mean 1.42% 1.25% 1.44% 1.53% 1.51% 1.43% 1.38% Median 1.63% 1.52% 1.72% 1.48% 1.84% 1.65% 1.61% Maximum 37.02% 23.12% 39.02% 43.93% 35.18% 35.65% 20.98% Minimum -34.50% -27.76% -73.08% -25.59% -26.81% -28.06% -28.44% Std. Dev. 0.07 0.06 0.07 0.06 0.06 0.05 0.05 Skewness -0.04 -0.32 -3.95 1.16 0.34 0.25 -0.54 Kurtosis 9.31 5.64 48.59 16.50 10.53 11.41 8.13
No. of Observation: 249 (from 01/01/1975 to 10/01/1995)
TABLE 1-9. THE RETURNS OF DEAD INCOME FUNDS VS LIVE FUNDS
This table reports the descriptive results (mean, median, maximum, minimum, standard deviation, skewness and kurtosis) of 13 dead income fund returns based on monthly data from 01/01/1975 to 12/01/1996. ‘Average Dead’ refers to the statistics of average returns of the dead income funds from 01/01/1975 to 12/01/1996. ‘Average Income’ refers to for the same period, the statistics of average returns of the income funds which survived from Jan 1975 to Oct 2003.
No. of Observation: 263 (from 01/01/1975 to 12/01/1996)
1 2 3 4 5 6 7 8 9 10 11 12 13 AverageDead Average Income Mean 1.32% 1.12% 1.15% 1.14% 1.20% 1.05% 1.18% 0.40% 0.94% 1.09% 0.72% 1.02% 1.20% 1.04% 1.36% Median 1.18% 0.92% 0.97% 1.01% 1.38% 1.14% 1.09% 0.04% 1.03% 0.86% 0.76% 1.36% 1.42% 1.14% 1.55% Maximum 31.17% 29.35% 33.33% 38.89% 22.41% 38.36% 30.97% 11.22% 13.00% 37.28% 23.68% 17.47% 22.06% 25.83% 23.95% Minimum -27.40% -24.85% -25.12% -21.81% -22.21% -23.16% -30.05% -13.46% -19.21% -22.17% -19.95% -26.51% -23.21% -22.16% -24.07% Std. Dev. 0.055 0.058 0.057 0.058 0.051 0.059 0.059 0.035 0.044 0.060 0.049 0.057 0.052 0.049 0.049 Skewness 0.008 0.140 0.225 0.676 -0.096 0.615 -0.186 0.126 -0.284 0.691 0.169 -0.574 -0.084 0.005 -0.219 Kurtosis 8.239 6.442 7.617 10.088 5.659 9.509 8.088 4.498 4.316 8.348 5.788 5.590 5.376 6.962 7.183
TABLE 1-10. THE DESCRIPTIVE STATISTICS OF REFERENCE VARIABLES
This table shows the moments for the monthly gross returns of the benchmark portfolios. The benchmark portfolios are passive buy & hold industry portfolios. The data are obtained from DataStream. The mean and standard deviations of the returns are expressed as net returns and in % per monthly.
Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis
FTSE all share 1.02% 1.41% 52.40% -27.90% 5.70% 1.515 20.508
Basic Materials 1.02% 1.31% 39.77% -33.94% 6.91% -0.202 7.753 Consumer goods 0.90% 0.68% 41.81% -34.93% 7.89% 0.259 5.615 Consumer service 1.00% 1.10% 51.65% -26.01% 6.33% 1.081 13.704 Financials 1.02% 1.23% 53.52% -27.42% 6.54% 1.030 14.493 Health care 1.19% 1.31% 45.94% -29.30% 5.71% 1.043 13.812 Industrials 1.11% 1.37% 49.17% -31.00% 6.91% 0.454 9.774