Active Mutual Fund Performance: Pandemic vs Financial Crisis : A study of Norwegian active mutual funds’ ability to create excess return during uncertain times.
Abstract
The covid-19 pandemic had significant effect on economies and markets all over the world.
Therefore, there is high interest in findings around the matter. There is, however, limited
research of fund performance during the Covid-19 pandemic. We study the performance of
active mutual Norwegian funds with a domestic investment strategy during the pandemic
and the financial crisis. By performing three regression models, the Single Index Model,
Fama French 3 Factor model and Carhart 4 Factor model, we examine the funds’ ability to
create excess return.
We do not find any evidence of excess return created during the pandemic. We do however
find evidence of significant positive excess return created during the financial crisis by
several funds. These funds were on average able to create a significant monthly alpha of
1.26% during the crisis. The best performing funds created a monthly alpha in the interval
(1.14%, 1.44%). From our findings it seems like fund managers were able to utilize the
uncertainty in the markets during the financial crisis better than during the pandemic.