Performance Assessment of a Mutual Fund Using Fractional Modeling and the Concept of Value at Risk

During the last few years, the extraordinary explosion experienced by fundraising organizations or investment companies purchasing other companies's stocks has led the responsible organizations for controlling these investments to apply some risk-based management guidelines. But the flexibility of this issue raises a lot of questions regarding the selection of the most accurate and most appropriate estimation model. The aim of this paper is to calculate the value at risk of mutual funds in Iran using fractional modeling. In this study, using the parametric method, we compute value at risk. Firstly, the variance is considered to be a constant value and then conditional ones (Arch and Garch models), finally, using the fractional modeling, we calculate and take into account it in the parametric method to find the best way to predict possible losses of the investment fund files. Consequently, according to the nonparametric, Kupiec, Christopherson and Hendricks tests, value at risk method is applicable for evaluating the performance of investment funds. On the other hand, the Garch and Figarch methods are capable of receiving %97.5 and %99 confidence levels and their results are acceptable in terms of statistics. Therefore, as a general the two methods stated to calculate value at risk of investment funds can be used for predicting the risk of these funds.