4. Empirical results
4.1 Expense ratio
Table 6 shows that the estimation of stochastic frontier analysis on expense ratio. The coefficient of RR (z1) is 0.316462 and significantly differs from zero, implying that the lower risk obtains the higher efficiency on expense ratio. The mutual fund of higher risk charge higher expense and transaction cost. However, a high risk fund charges high expense and cost but there is no corresponding gain in 2007 global financial crisis, lead to low efficiency on expense ratio. Table 7 presents average TFE scores of RR1 to RR5 in 2007-2012. We can see that no matter what year it is, the more risk accompanies more inefficiency on expense ratio.
The coefficient of age of fund (z2) is -0.017022 and significantly differ from zero, it means that the longer established mutual funds do better than newly funds on expense ratio.
Longer fund could follow the previous experience and fix the mistake on expense and it has a better efficiency on expense ratio.
19
The coefficient of gender of managers (z3) is -0.027422 and significantly differ from zero, it means that female managers have higher efficiency on expense ratio. Table 8 presents average TFE of gender to expense ratio, showing that the female on average performs better than male.
The coefficient of a manager with foreign academic degree or not (z4) is 0.079319, which significantly differs from zero, implying that if a manager does not have foreign academic degree, then he/she has higher efficiency on expense ratio. Compared with the domestic culture and education, foreign is more opener. These backgrounds reflect on their attitude of operating funds. However, face relative expense and cost of funds should be conservative. Hence the efficiency of the managers without foreign academic degree would be better. Table 9 shows that the average TFE score of managers with foreign academic degree is 0.155618 and that without MBA degree is 0.200563.
The coefficient of a manager has MBA degree or not (z5) is -0.044596 differ from zero, it means that if a manager has MBA degree, the efficiency of expense ratio could be higher. A lot of managerial courses about costs and expenses have to be taken in MBA. These courses are helpful in financial practice.
20
Table 6: Stochastic frontier estimation results on expense ratio Variable coeffi ci ent Standard Error t-rati o
Const ant -0.889636 0.133366 -6.670645 ***
ln(x2) 0.077310 0.005647 13.691483 ***
ln(x3) -0.009687 0.014331 -0.675950
ln( y) -0.094638 0.030728 -3.079887 ***
z1 0.316462 0.001497 211.341570 ***
z2 -0.017022 0.001618 -10.518236 ***
z3 -0.027422 0.014673 -1.868926 **
z4 0.079319 0.015919 4.982637 ***
z5 -0.044596 0.014930 -2.987087 ***
2 2 2
u
v
0.088007 0.002701 32.581926 ***
2
2
u 0.995756 0.127383 7.816994 ***
Log-likeli hood -380.091290
Tot al obs. 310
Not e: * represents 10% level of significance, ** represents 5% level of significance, ***
represents 1% level of significance.
21
Table 7: Average TFE of RR to expense ratio
Variables 2007 2008 2009 2010 2011 2012 Average
RR 1 0.397984 0.443633 0.504914 0.524920 0.533447 0.553162 0.493010 RR 2 0.204763 0.240708 0.215570 0.216201 0.215646 0.229891 0.220463 RR 3 0.151479 0.160789 0.161783 0.163787 0.160025 0.159259 0.159520 RR 4 0.121401 0.125688 0.125752 0.122488 0.125207 0.125226 0.124294 RR 5 0.114967 0.118286 0.119080 0.113791 0.117098 0.117054 0.116713 Average 0.198119 0.217821 0.225420 0.228238 0.230285 0.236918 0.222800
Table 8: Average TFE of gender to expense ratio
Variables 2007 2008 2009 2010 2011 2012 Average
Female 0.212283 0.210006 0.217399 0.238348 0.234319 0.252747 0.227517 Male 0.148263 0.165008 0.170598 0.164336 0.166972 0.158636 0.162302 Average 0.180273 0.187507 0.193999 0.201342 0.200646 0.205692 0.194910
Table 9: Average TFE of FAD to expense ratio
Variables 2007 2008 2009 2010 2011 2012 Average
FAD 0.137592 0.157282 0.151065 0.174132 0.156953 0.156683 0.155618 Without FAD 0.181529 0.191642 0.206144 0.197271 0.209337 0.217452 0.200563 Average 0.159561 0.174462 0.178605 0.185702 0.183145 0.187067 0.178090
Table 10: Average TFE of MBA to expense ratio
Variables 2007 2008 2009 2010 2011 2012 Average
MBA 0.146275 0.166978 0.165329 0.171112 0.163828 0.157376 0.161817 Without MBA 0.180017 0.189802 0.202794 0.199775 0.209116 0.217678 0.199864 Average 0.163146 0.178390 0.184061 0.185444 0.186472 0.187527 0.180840
22
In expense ratio efficiency, we rank the efficiency of the top 10 and bottom 10 mutual funds in 6 years. We found that KGI Victory Money Market Fund is the most efficient in 2007 and 2008; HSBC NTD Money Market Fund 2 is top 1 in 2010 to 2012; Manulife Money Market Fund is the most stable performance fund, it appears in the ranking top10 in these six years. Almost all of the top 10 funds are money market fund in 2007 to 2012. However, there are some bad performance mutual funds in these six years; Allianz Global Investors Global Eco Trends Fund and Cathay Global Infrastructure Fund successively list on this last 10. The efficiency of funds to expense ratio increase over time, which average TFE scores are 0.168915, 0.181556, 0.189621, 0.189882, 0.192608 and 0.196281 from 2007 to 2012.
23
Table 11: Annual ranking of expense ratio TFE
2007 Top 10 2007 Last 10
KGI Victory Money Market Fund 0.636329 Prudential Financial Global Small & Mid Cap Fund 0.079181 Truswell Hua-Win Money Market Fund 0.617500 Prudential Financial Global Bio-Health Fund 0.077642
Yuanta Wan Tai Money Market Fund 0.606100 HSBC BRIC Fund 0.077224
Manulife Money Market Fund 0.603835 Deutsche Far Eastern DWS Global Material & Energy Fund 0.077072 Eastspring Investments Well Pool Money Market Fund 0.579427 JPMorgan (Taiwan) Global Emerging Markets Fund 0.075768
BlackRock TWD Money Market Fund 0.562827 HSBC Global Emerging Markets Fund 0.074303
ABITL Money Market Fund 0.549472 Allianz Global Investors Global Eco Trends Fund 0.070699
Truswell Money Market Fund 0.547336 FSITC Malaysia Fund 0.070426
Paradigm Pion Money Market Fund 0.539144 Mega Balanced Fund 0.062080
Invesco ROC Money Market Fund 0.489157 Cathay Global Infrastructure Fund 0.040450
2008 Top 10 2008 Last 10
KGI Victory Money Market Fund 0.700410 JPMorgan (Taiwan) China Concept Fund 0.081528
Manulife Money Market Fund 0.692646 HSBC Global Emerging Markets Fund 0.079425
BlackRock TWD Money Market Fund 0.689059 Allianz Global Investors Global Biotech Fund 0.078982
Truswell Hua-Win Money Market Fund 0.649490 HSBC BRIC Fund 0.077992
Jih Sun Money Market Fund 0.637508 Cathay Global Infrastructure Fund 0.077649
JPMorgan (Taiwan) Wealth Management Fund 0.601199 Prudential Financial Global Small & Mid Cap Fund 0.075925 Shinkong Chi-Shin Money Market Fund 0.597250 JPMorgan (Taiwan) Global Dynamic Fund 0.073396 Eastspring Investments Well Pool Money Market Fund 0.596005 JPMorgan (Taiwan) Global Emerging Markets Fund 0.065520 Yuanta Wan Tai Money Market Fund 0.581616 Eastspring Investments Asia-Pacific High Yield Equity Fund 0.029473
Paradigm Pion Money Market Fund 0.575529 PineBridge Taiwan Giant Fund 0.016154
24
Table 11: Annual ranking of expense ratio TFE (con’t)
2009 Top 10 2009 Last 10
Manulife Money Market Fund 0.858375 JPMorgan (Taiwan) Global Dynamic Fund 0.086980
HSBC NTD Money Market Fund 2 0.846735 JPMorgan (Taiwan) China Concept Fund 0.086860
Eastspring Investments Well Pool Money Market Fund 0.799781 Deutsche Far Eastern DWS Global Material & Energy Fund 0.085660
HSBC NTD Money Market Fund 0.797687 Mega Global Fund 0.084023
Yuanta Wan Tai Money Market Fund 0.787555 Prudential Financial Global Bio-Health Fund 0.079705
Truswell Hua-Win Money Market Fund 0.785948 HSBC Global Emerging Markets Fund 0.078720
Invesco ROC Money Market Fund 0.747006 HSBC BRIC Fund 0.074930
BlackRock TWD Money Market Fund 0.742248 Allianz Global Investors Global Eco Trends Fund 0.070590
Shinkong Chi-Li Money-market Fund 0.706012 Cathay Global Infrastructure Fund 0.069854
Shinkong Chi-Shin Money Market Fund 0.655020 JPMorgan (Taiwan) Global Emerging Markets Fund 0.069660
2010 Top 10 2010 Last 10
HSBC NTD Money Market Fund 2 0.917262 FSITC Malaysia Fund 0.084339
Manulife Money Market Fund 0.893475 JPMorgan (Taiwan) Global Dynamic Fund 0.084077
HSBC NTD Money Market Fund 0.858438 Prudential Financial Global Bio-Health Fund 0.080982
Eastspring Investments Well Pool Money Market Fund 0.838562 Allianz Global Investors Global Eco Trends Fund 0.078765 Invesco ROC Money Market Fund 0.761257 Deutsche Far Eastern DWS Global Material & Energy Fund 0.078310
Yuanta Wan Tai Money Market Fund 0.755573 HSBC BRIC Fund 0.075217
Paradigm Pion Money Market Fund 0.747872 HSBC Global Emerging Markets Fund 0.074204
BlackRock TWD Money Market Fund 0.718386 JPMorgan (Taiwan) Global Emerging Markets Fund 0.073749 Deutsche Far Eastern DWS Taiwan Money Market Fund 0.677736 Eastspring Investments Asia-Pacific High Yield Equity Fund 0.068306
Schroder New Era Money Market Fund 0.652684 Cathay Global Infrastructure Fund 0.067837
25
Table 11: Annual ranking of expense ratio TFE (con’t)
2011 Top 10 2011 Last 10
HSBC NTD Money Market Fund 2 0.940837 JPMorgan (Taiwan) China Concept Fund 0.086546
Manulife Money Market Fund 0.933811 JPMorgan (Taiwan) Global Dynamic Fund 0.085118
HSBC NTD Money Market Fund 0.880094 Prudential Financial Global Selection Fund 0.082654
BlackRock TWD Money Market Fund 0.792476 Prudential Financial Global Bio-Health Fund 0.079834 Schroder New Era Money Market Fund 0.780954 Allianz Global Investors Global Eco Trends Fund 0.079695
Invesco ROC Money Market Fund 0.771084 HSBC Global Emerging Markets Fund 0.079635
Yuanta Wan Tai Money Market Fund 0.755643 Cathay Global Infrastructure Fund 0.079042
Eastspring Investments Well Pool Money Market Fund 0.725779 HSBC BRIC Fund 0.074699
Paradigm Pion Money Market Fund 0.687203 JPMorgan (Taiwan) Global Emerging Markets Fund 0.074153 ABITL Money Market Fund 0.654839 Prudential Financial Emerging Market Selection Fund 0.038358
2012 Top 10 2012 Last 10
HSBC NTD Money Market Fund 2 0.906632 JPMorgan (Taiwan) Global Dynamic Fund 0.082778
HSBC NTD Money Market Fund 0.848585 Allianz Global Investors Global Eco Trends Fund 0.081927 BlackRock TWD Money Market Fund 0.834482 Prudential Financial Global Small & Mid Cap Fund 0.081755 Invesco ROC Money Market Fund 0.780944 Prudential Financial Global Bio-Health Fund 0.078941
JPMorgan (Taiwan) Wealth Management Fund 0.766765 HSBC BRIC Fund 0.076726
Manulife Money Market Fund 0.722070 JPMorgan (Taiwan) Global Emerging Markets Fund 0.073865
ABITL Money Market Fund 0.720827 JPMorgan (Taiwan) Global Balanced Fund 0.073563
Yuanta Wan Tai Money Market Fund 0.707725 Cathay Global Infrastructure Fund 0.073188
THE RSIT Enhanced Money Market Fund 0.699717 Prudential Financial Global Selection Fund 0.065664 Eastspring Investments Well Pool Money Market Fund 0.688325 Prudential Financial Emerging Market Selection Fund 0.054256
26