Pre-COVID Performance and Risk Assessment of Asset Management Companies; Evidence from an Emerging Market
Keywords:
Z-Score, Emerging market, asset management companies, ARDL, Pre-COVIDAbstract
By using the Autoregressive Distributed Lag (ARDL), and the Emerging Market Z-Score Model, we have examined the performance and factor of riskiness of Pakistan's asset management companies, for the years pertaining to 2013-2018. Moreover, we also tested the stability of the ARDL model. The findings reveal that microeconomic and macroeconomic factors have a long-run impact on the performance of asset management companies (AMCs). Besides this, the Emerging Market Z-Score Model also categorizes the asset management industry in the safe zone, which indicates that the industry has no probability of default. This study was delimited to Pre-COVID data available for asset management companies that were taken into consideration. We can arguably conclude that the Post-COVID performance, and riskiness of AMCs might have inconsistent outcomes with our study. This study's findings may encourage, and aid investors, fund managers, and market makers to revisit their long-term investment patterns, keeping in mind the post-COVID short term volatility dynamics of the industry, which was the primary limitation of this study.
References
Altman, E. I. (2005). An emerging market credit scoring system for
corporate bonds. Emerging Markets Review, 6(4), 311-323.
Altman, E. I. (2018). A fifty-year retrospective on credit risk models, the
Altman Z-score family of models and their applications to financial
markets and managerial strategies. Journal of Credit Risk, 14(4), 1-34.
Boston Consulting Group. (2020). Global Asset Management 2020: Protect
Adapt and Innovate. Retrieved from https://imagesrc.bcg.com/Images/BCG-Global-Asset-Management-2020-May2020-r_tcm9-247209.pdf
Chen, J., Hong, H. G., Huang, M., & Kubik, J. D. (2004). Does fund size
erode performance? The role of liquidity and organization.
American Economic Review, 94(5), 1276-1302.
Gandolfi, G., & Arcuri, M. C. (2013). Italian asset management companies:
Governance structure and mutual funds. Investment Management
and Financial Innovations, 10(2), 64-72.
Georgios, K., Κalliopi, K., & Κalliopi, M. (2012, May). In Edward I. Altman
(Ed.), Model of bankruptcy and the implementation of it on the Greek
cooperative banks. Proceedings of the 9th Annual MIBS International
Conference, (pp. 14-18), Cambridge, MA, USA.
Ghosh, U., Adhikari, C., & Neogi, M. A. (2017). Study of risk evaluation in
asset management companies through EM Z-Score model. Journal
of Advance Management and Research, 5(5), 225-243.
Huang, R., Pilbeam, K., & Pouliot, W. (2019). Do actively managed US
mutual funds produce positive alpha? Journal of Economic Behavior
and Organization. 1-21.
Linter, J. (1973). Inflation and common stock prices in a cyclical
context. Annual Report. National Bureau of Economic Research.
New York, NY: Author, 23-36.
Pesaran, M. H., Shin, Y., & Smith, R. J. (1996). Testing for the 'Existence of a
Long-run Relationship' (No. 9622). Cambridge (England):
Cambridge University Press.
Rizvi, S. K. A., Mirza, N., Naqvi, B., & Rahat, B. (2020). Covid-19 and asset
management in EU: a preliminary assessment of performance and
investment styles. Journal of Asset Management, 21(4), 281-291.
Shaheen, R., & Javid, A. Y. (2014). Effect of Credit Rating on Firm Performance
and Stock Return: Evidence from KSE Listed Firms (No. 2014: 104).
Pakistan Institute of Development Economics.
Sharma, N. (2013). Altman model and financial soundness of Indian banks.
International Journal of Accounting and Finance, 3(2), 55-60.
Tahir, M. (2019). Analyzing the performance of asset management companies in
Pakistan (unpublished Master's thesis). University of The Punjab,
Lahore, Pakistan.
Vercueil, J. (2016). Emerging Economies. Genealogy, Evolutions and
Vulnerabilities. http://www.osservatorio-economie-emergentitorino.it/news/125-economie-emergenti-emerging-economies04.html
