Which Factors Matter to Investors? Evidence from Brazilian Mutual Funds

Cavalcante-Filho, Elias; De-Losso, Rodrigo; Santos, José Carlos S.

doi:10.7819/rbgn.v23i1.4088

Elias Cavalcante-Filho

. University of São Paulo, Faculty of Economics, Business Administration, Accounting, and Actuarial Sciences, Department of Economics, São Paulo, Brazil

http://orcid.org/0000-0001-9500-4925

Rodrigo De-Losso

. University of São Paulo, Faculty of Economics, Business Administration, Accounting, and Actuarial Sciences, Department of Economics, São Paulo, Brazil

http://orcid.org/0000-0002-3461-8621

José Carlos S. Santos

. University of São Paulo, Faculty of Economics, Business Administration, Accounting, and Actuarial Sciences, Department of Economics, São Paulo, Brazil

http://orcid.org/0000-0002-5680-0264

Responsible Editor:

Prof. Dr. Joelson Oliveira de Sampaio

Reviewers:

Vinicus Brunassi; Herbert Kimura.

Conflicts of interest:

The authors have no conflict of interest to declare

1
. Elias Cavalcante-Filho, Doctor in Economics, University of Sao Paulo, Sao Paulo, Brazil. E-mail: e.cavalcante@usp.br

2
. Rodrigo De-Losso, Doctor of Economics, University of Chicago, Illinois City, USA. E-mail: delosso@usp.br

3
. José Carlos de Souza Santos, Doctor in Economics, University of Sao Paulo, Sao Paulo, Brazil. E-mail: jcdssan@usp.br

1
. Elias Cavalcante-Filho: Definition of research problem, Development of hypotheses or research questions (empirical studies), Development of theoretical propositions (theoretical work), Theoretical foundation/literature review, Definition of methodological procedures, Data collection, Statistical analysis, Analysis and interpretation of data, Critical revision of the manuscript, Manuscript writing.

2
. Rodrigo De-Losso: Theoretical foundation/literature review, Statistical analysis, Manuscript writing.

3
. José Carlos de Souza Santos: Definition of research problem, Development of hypotheses or research questions (empirical studies), Definition of methodological procedures, Critical revision of the manuscript, Manuscript writing.

Anbima Ranking	Number of Funds	Number Assessed	Average TNA (Million BRL)
Active Management Funds
Dividend Funds	90	7,800	181.90
IBOVESPA Active Funds	367	15,061	53.09
IBOVESPA Active Funds with Leverage	111	3,019	42.36
IBOVESPA Index Funds**	2	58	188.12
IBrX Active Funds	75	3,587	117.87
IBrX Active Funds with Leverage	5	185	187.53
IBrX Index Funds**	2	105	91.43
Index Funds**	5	332	70.73
Active Index Funds	340	33,235	123.60
Free Funds	1764	102,221	128.64
Free Funds with Leverage	65	1,366	47.49
Small-Cap Funds	53	5,201	114.24
Sustainability/Governance Funds	30	3,622	113.14
Value/Growth Funds	159	12,751	111.61
Closed-end Stocks	3	128	58.66
Overall Active Management	3,071	188,671	108.69
Passive Management Funds
IBOVESPA Index Funds	60	3,002	50.48
IBrX Index Funds	14	761	47.54
Index Funds	71	8,222	126.97
Dividend ETFs	40	2,023	425.66
Overall Passive Management	185	14,008	162.66

	Active	Passive	Overall
Number of Funds	3,071	185	3,256
Open-end	2,016	82	2,098
Closed-end	31	-	31
Unranked fund	1,024	103	1,127
Number of months (Jan/2000 - Apr/19)	220	220	220
Overall number of observations	188,671	651	202,679

Variable	Average	Standard Deviation	Min.	p05	Median	p95	Max.
Panel A: Full Sample Base
Active Funds (N = 3,071; Obs = 188,671)
Net inflows (%)	0.34	9.35	-35.76	-9.71	0.00	12.62	51.74
Age (months)	103.86	58.00	1.00	23.00	94.00	220.00	220.00
TNA (BRL million)	119.81	265.91	0.10	3.31	39.90	499.02	5,390.11
Return (%)	0.02	5.67	-16.37	-9.58	-0.01	9.53	15.31
Cumulative return (%)	7.43	61.49	-99.63	-63.19	-2.88	116.74	538.05
Trading activity rate (%)	64.49	36.12	0.00	3.83	79.22	100.00	100.00
Management fee (%)	0.104	0.094	0.00	0.00	0.088	0.249	0.799
Performance fee (%)	0.48	0.79	0.00	0.00	0.26	1.46	11.12
Passive Funds (N = 185; Obs = 14,008)
Net inflows (%)	-0.02	9.87	-35.76	-11.79	-0.12	13.75	51.74
Age (months)	129.88	64.90	7.00	28.00	137.00	220.00	220.00
TNA (BRL million)	149.40	433.29	0.17	3.17	45.32	509.92	6,664.69
Return (%)	0.04	6.48	-16.37	-11.29	-0.13	10.22	15.31
Cumulative return (%)	-14.53	31.88	-94.49	-58.40	-15.73	35.88	139.78
Trading activity rate (%)	79.46	30.52	1.85	10.19	98.89	100.00	100.00
Management fee (%)	0.08	0.10	0.00	0.00	0.02	0.29	0.55
Performance fee (%)	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Panel B: Net Inflow Sample Base Analysis
Active Funds (N =1,193; Obs =112,388)
Net inflows (%)	0.48	9.68	-35.76	-10.28	-0.12	14.92	51.74
Age (months)	121.80	55.83	30.00	43.00	113.00	220.00	220.00
TNA (BRL million)	144.00	304.68	0.10	3.32	46.25	594.63	5,390.11
Return (%)	0.12	5.61	-16.37	-9.37	0.07	9.51	15.31
Cumulative return (%)	14.65	69.21	-94.80	-62.74	1.66	137.00	538.05
Trading activity rate (%)	89.31	13.90	50.00	57.41	96.59	100.00	100.00
Management fee (%)	0.12	0.10	0.00	0.00	0.12	0.29	0.73
Performance fee (%)	0.31	0.43	0.00	0.00	0.18	0.93	4.70

Variable	Mean	Standard Deviation	Min.	p05	Median	p95	Max.
	Panel A: Fund analysis (1,193 funds)
alpha coefficient ( $\hat{α}$ )	0.085	0.479	-3.046	-0.716	0.104	0.772	2.337
market coefficient( $\hat{β}$ )	0.703	0.242	-0.475	0.246	0.751	0.964	1.881
size coefficient ( $\hat{s}$ )	0.110	0.258	-1.200	-0.262	0.095	0.539	1.350
value coefficient ( $\hat{h}$ )	-0.032	0.188	-0.895	-0.314	-0.037	0.294	0.970
moment coefficient ( $\hat{w}$ )	0.061	0.142	-1.117	-0.195	0.065	0.279	0.524
liquidity coefficient ( $\hat{l}$ )	0.097	0.242	-0.889	-0.273	0.086	0.486	1.411
industry coefficient 1 ( ${\hat{i}}^{1}$ )	-0.010	0.098	-0.500	-0.139	-0.013	0.145	0.532
industry coefficient 2 ( ${\hat{i}}^{2}$ )	0.090	0.393	-2.534	-0.165	-0.017	0.801	3.668
industry coefficient 3 ( ${\hat{i}}^{3}$ )	-0.025	0.133	-0.663	-0.241	-0.016	0.137	1.118
	Panel B: Analysis over time (220 months)
$A L P H A_{M 8 F}$	0.114	1.162	-2.768	-1.657	0.091	1.727	6.961
RMARKET	0.058	5.270	-21.064	-8.350	-0.097	8.415	12.096
RSIZE	0.080	1.335	-4.778	-1.952	0.030	2.031	6.035
RVALUE	0.116	0.896	-3.762	-1.033	0.013	1.485	3.956
RMOMENTUM	0.005	0.761	-3.843	-1.361	0.024	1.065	3.175
RLIQUIDITY	-0.080	0.797	-3.253	-1.438	0.010	1.082	3.222
RIND1	-0.024	0.346	-2.023	-0.598	-0.007	0.522	1.633
RIND2	-0.063	1.821	-10.444	-3.074	0.008	2.467	6.429
RIND3	0.075	0.687	-2.403	-0.602	0.000	1.066	5.004

Panel A: Correlation between components of the funds’ return
	$A L P H A_{M 8 F}$	RMARKET	RSIZE	RMOMENT	RLIQUIDITY	RIND1	RIND2	RIND3
$A L P H A_{M 8 F}$	1.000
RMARKET	-0.048	1.000
RSIZE	-0.046	0.103	1.000
RVALUE	-0.089	-0.101	0.036	1.000
RMOMENT	-0.066	-0.097	-0.164	0.077	1.000
RLIQUIDITY	-0.045	0.032	-0.510	-0.170	-0.029	1.000
RIND1	-0.101	-0.060	-0.051	-0.036	-0.006	0.022	1.000
RIND2	-0.097	-0.033	-0.329	-0.322	-0.131	0.096	-0.081	1.000
RIND3	-0.102	0.059	0.037	-0.028	-0.135	-0.004	-0.020	-0.189
Panel B: Correlation between alphas
	$A L P H A_{M A R}$	$A L P H A_{C A P M}$	$A L P H A_{M 3 F}$	$A L P H A_{M 4 F}$	$A L P H A_{M 5 F}$	$A L P H A_{M 8 F}$
$A L P H A_{M A R}$	1.000
$A L P H A_{C A P M}$	0.738	1.000
$A L P H A_{M 3 F}$	0.674	0.916	1.000
$A L P H A_{M 4 F}$	0.652	0.865	0.944	1.000
$A L P H A_{M 5 F}$	0.637	0.837	0.913	0.970	1.000
$A L P H A_{M 8 F}$	0.578	0.750	0.820	0.867	0.893	1.000

	MAR	CAPM	M3F	M4F	M5F	M8F
MAR		-8.532	7.377	13.008	16.754	20.363
p-value		(0.019)	(0.006)	(0.000)	(0.000)	(0.000)
CAPM	8.532		22.379	25.029	28.048	26.344
p-value	(0.019)		(0.000)	(0.000)	(0.000)	(0.000)
M3F	-7.377	-22.379		11.799	16.153	18.811
p-value	(0.006)	(0.000)		(0.132)	(0.019)	(0.000)
M4F	-13.008	-25.029	-11.799		30.938	18.173
p-value	(0.000)	(0.000)	(0.132)		(0.005)	(0.000)
M5F	-16.754	-28.048	-16.153	-30.938		14.922
p-value	(0.000)	(0.000)	(0.019)	(0.005)		(0.000)
M8F	-20.363	-26.344	-18.811	-18.173	-14.922
p-value	(0.000)	(0.000)	(0.000)	(0.000)	(0.000)

	Without interactions	High and Low Sentiment Periods (Inflows)			High and Low Sentiment Periods (Shares)			Restricted to sophisticated Investors			Minimum Investment Requirement
	(1)	(2)			(3)			(4)			(5)
	(1)	Low	High	Dif.	Low	High	Dif.	Restricted	Unrestricted	Dif.	≥100 k	<100 k	Dif.
$A L P H A_{M 8 F}$	0.688	0.483	1.008	0.526	0.623	0.722	0.099	0.519	0.845	0.326	0.207	0.701	0.495
	(0.041)*	(0.040)*	(0.096)*	(0.104)*	(0.047)*	(0.094)*	(0.108)	(0.043)*	(0.063)*	(0.071)*	(0.161)	(0.041)*	(0.163)*

RMARKET	0.246	0.090	0.592	0.502	0.189	0.472	0.282	0.121	0.329	0.208	-0.029	0.254	0.282
	(0.040)*	(0.037)*	(0.095)*	(0.103)*	(0.047)*	(0.074)*	(0.088)*	(0.040)*	(0.048)*	(0.042)*	(0.108)	(0.040)*	(0.099)*

RSIZE	0.784	0.633	1.120	0.487	0.785	0.688	-0.097	0.636	0.915	0.280	0.530	0.784	0.254
	(0.068)*	(0.060)*	(0.179)*	(0.190)*	(0.081)*	(0.158)*	(0.179)	(0.078)*	(0.090)*	(0.104)*	(0.288)	(0.069)*	(0.291)

RVALUE	0.454	0.263	1.014	0.752	0.306	0.915	0.610	0.133	0.720	0.587	-0.437	0.488	0.925
	(0.103)*	(0.111)*	(0.239)*	(0.262)*	(0.118)*	(0.200)*	(0.232)*	(0.119)	(0.145)*	(0.167)*	(0.392)	(0.107)*	(0.416)*

RMOMENTUM	0.648	0.408	1.348	0.939	0.548	1.348	0.800	0.355	0.867	0.512	0.575	0.645	0.070
	(0.077)*	(0.074)*	(0.215)*	(0.229)*	(0.087)*	(0.222)*	(0.239)*	(0.091)*	(0.113)*	(0.140)*	(0.356)	(0.080)*	(0.374)

RLIQUIDITY	1.047	0.884	1.068	0.184	1.042	0.818	-0.224	0.824	1.213	0.388	1.020	1.046	0.026
	(0.094)*	(0.092)*	(0.260)*	(0.279)	(0.105)*	(0.216)*	(0.241)	(0.105)*	(0.120)*	(0.134)*	(0.402)*	(0.095)*	(0.398)

RIND1	0.612	0.282	1.660	1.378	0.445	0.905	0.461	-0.049	1.188	1.237	-0.267	0.636	0.904
	(0.132)*	(0.133)*	(0.296)*	(0.324)*	(0.164)*	(0.201)*	(0.259)	(0.164)	(0.201)*	(0.262)*	(0.479)	(0.133)*	(0.469)

RIND2	0.859	0.662	1.394	0.732	0.470	0.698	0.228	0.619	1.043	0.424	0.619	0.867	0.248
	(0.096)*	(0.096)*	(0.181)*	(0.204)*	(0.173)*	(0.257)*	(0.310)	(0.106)*	(0.123)*	(0.127)*	(0.422)	(0.097)*	(0.422)

RIND3	0.857	0.648	1.166	0.517	0.852	0.984	0.132	0.524	1.161	0.637	0.342	0.875	0.534
	(0.127)*	(0.116)*	(0.358)*	(0.378)	(0.175)*	(0.273)*	(0.322)	(0.154)*	(0.166)*	(0.194)*	(0.515)	(0.128)*	(0.512)
Controls	Yes	Yes			Yes			Yes			Yes
Fixed time effect	Yes	Yes			Yes			Yes			Yes
Observations	92,793	92,793			87,129			92,793			92,793
R²-Adjus,	0.120	0.127			0.127			0.122			0.120
*p<0,05

	0%	1%	5%	10%	50%	90%	95%	99%	100%
$\hat{θ}$	0.0468	0.1682	0.1913	0.2021	0.2538	0.3297	0.3630	0.4677	0.8306
t-value	0.2981	3.1447	3.9092	4.5680	6.9228	10.6821	11.7704	12.2603	13.4452
R²	0.0816	0.3522	0.3895	0.4037	0.4217	0.4798	0.5124	0.6380	0.7947

	Without interactions	High and Low Sentiment Periods (Inflows)			High and Low Sentiment Periods (Shares)			Restricted to sophisticated investors			Minimum Investment Requirement
	(1)	(2)			(3)			(4)			(5)
	(1)	Low	High	Dif.	Low	High	Dif.	Restricted	Unrestricted	Dif.	≥100 k	<100 k	Dif.
$A L P H A_{P e r s i s t e n t}$	0.515	0.357	0.623	0.267	0.491	0.316	-0.175	0.420	0.603	0.183	0.326	0.520	0.193
	(0.061)*	(0.058)*	(0.143)*	(0.154)	(0.068)*	(0.133)*	(0.149)	(0.063)*	(0.091)*	(0.101)	(0.243)	(0.062)*	(0.243)

$A L P H A_{R a n d o m}$	0.824	0.586	1.291	0.705	0.732	1.019	0.287	0.600	1.034	0.434	0.117	0.845	0.729
	(0.052)*	(0.050)*	(0.130)*	(0.139)*	(0.057)*	(0.121)*	(0.138)*	(0.057)*	(0.075)*	(0.085)*	(0.212)	(0.052)*	(0.212)*

RMARKET	0.249	0.091	0.601	0.510	0.191	0.486	0.295	0.123	0.333	0.210	-0.031	0.257	0.288
	(0.040)*	(0.037)*	(0.093)*	(0.101)*	(0.047)*	(0.073)*	(0.087)*	(0.040)*	(0.047)*	(0.041)*	(0.108)	(0.040)*	(0.099)*

RSIZE	0.776	0.631	1.068	0.437	0.783	0.664	-0.119	0.631	0.907	0.276	0.526	0.776	0.250
	(0.069)*	(0.060)*	(0.185)*	(0.196)*	(0.081)*	(0.169)*	(0.188)	(0.079)*	(0.089)*	(0.103)*	(0.291)	(0.070)*	(0.294)

RVALUE	0.465	0.274	1.005	0.731	0.321	0.873	0.552	0.137	0.741	0.604	-0.436	0.501	0.937
	(0.101)*	(0.109)*	(0.238)*	(0.260)*	(0.116)*	(0.189)*	(0.221)*	(0.119)	(0.141)*	(0.165)*	(0.390)	(0.104)*	(0.415)*

RMOMENTUM	0.647	0.408	1.351	0.943	0.551	1.293	0.742	0.356	0.864	0.508	0.569	0.643	0.074
	(0.077)*	(0.074)*	(0.216)*	(0.229)*	(0.087)*	(0.241)*	(0.256)*	(0.091)*	(0.111)*	(0.136)*	(0.356)	(0.080)*	(0.376)

RLIQUIDITY	1.032	0.877	0.999	0.122	1.037	0.733	-0.304	0.818	1.189	0.371	1.037	1.031	-0.005
	(0.093)*	(0.091)*	(0.263)*	(0.281)	(0.103)*	(0.220)*	(0.244)	(0.106)*	(0.117)*	(0.134)*	(0.402)*	(0.093)*	(0.398)

RIP1	0.595	0.267	1.673	1.407	0.430	0.882	0.452	-0.060	1.167	1.226	-0.276	0.617	0.893
	(0.134)*	(0.135)*	(0.307)*	(0.335)*	(0.168)*	(0.205)*	(0.265)	(0.165)	(0.200)*	(0.258)*	(0.480)	(0.135)*	(0.471)

RIP2	0.853	0.662	1.352	0.690	0.479	0.610	0.131	0.616	1.037	0.421	0.657	0.862	0.204
	(0.098)*	(0.097)*	(0.192)*	(0.214)*	(0.176)*	(0.276)*	(0.327)	(0.107)*	(0.124)*	(0.126)*	(0.425)	(0.098)*	(0.427)

RIP3	0.850	0.641	1.178	0.537	0.842	0.900	0.059	0.524	1.144	0.621	0.355	0.868	0.513
	(0.128)*	(0.117)*	(0.344)*	(0.364)	(0.177)*	(0.291)*	(0.340)	(0.154)*	(0.166)*	(0.194)*	(0.519)	(0.129)*	(0.519)
Controls	Yes	Yes			Yes			Yes			Yes
Fixed time effect	Yes	Yes			Yes			Yes			Yes
Observations	92,793	87,129			92,793			92,793			92,793
R²-Adjus,	0.120	0.127			0.128			0.122			0.121

[1] Responsible Editor:

Prof. Dr. Joelson Oliveira de Sampaio

Brasil

Brasil

Which Factors Matter to Investors? Evidence from Brazilian Mutual Funds

Abstract

Purpose:

Design/methodology/approach:

Findings:

Originality/value: