Management Science Letters 5 (2015) 577–590 Contents lists available at GrowingScience Management Science Letters homepage: www.GrowingScience.com/msl Conditional selectivity performance of Indian mutual fund schemes: An empirical study Subrata Roy a* a Assistant Professor, Department of Commerce, Rabindra Mahavidyalaya, Champadanha, Hooghly, West Bengal, India C H R O N I C L E A B S T R A C T Article history: Received January 20, 2015 Received in revised format 16 February 2015 Accepted 20 April 2015 Available online April 22 2015 The present study seeks to examine the stock-selection performance of the sample open-ended equity mutual fund schemes of Birla Sun Life Mutual Fund Company based on traditional and conditional performance measures. It is generally expected that inclusion of some relevant predetermined public information variables in the conditional CAPM provides better performance estimates as compared to the traditional measures. The study reports that after inclusion of conditioning public information variables, the selectivity performances of the schemes have dramatically improved relative to the traditional measure and also found that conditional measure is superior to traditional measure in statistical test. Growing Science Ltd. All rights reserved. 5 © 201 Keywords: Conditional Model Jensen Ferson & Schadt Birla Sunlife Selectivity Traditional Model 1. Introduction Mutual fund plays a crucial role in mobilizing savings from the household sector to the capital market and it builds a link between the two markets. Commonly, it offers to the investors a rational return with a minimum degree of expected risk. Presently, performance evaluation of mutual fund is one of the significant and appealing topics to the academicians and professionals. The investment performance generally deals with three basic issues (1) successful prediction of security prices, (2) efficient prediction of market movement and (3) reduction of diversifiable risk through diversification (Jensen, 1968).These issues take a flight after the development of capital asset pricing model (CAPM) independently by Sharpe (1964), Linter (1965) and Mossin (1966). There are many studies examined portfolio performance by using relative measures and those measures basically concentrate on ranking of portfolios and does not give insight on risk control mechanism. Jensen (1968) proposed an absolute measure of portfolio performance to the existing literature. Although, the traditional measure of Jensen does not provide satisfactory result when risk and return are constant over time. Ferson and Schadt (1996) proposed a conditional investment performance measure, which estimates the risk, return and coefficients with more accuracy with the changes of time. * Corresponding author. Tel: +91 9432653985 E-mail address: subrata1_roy@yahoo.com (S. Roy) © 2015 Growing Science Ltd. All rights reserved. doi: 10.5267/j.msl.2015.4.008