Performance evaluation with security-level holdings: a study of government bond funds in Southern Europe during the Euro debt crisis

This study is the first to evaluate the performance of Euro government bond mutual funds with characteristic-based benchmarks. This analysis is based on the security-level holdings of the most-affected countries in the Euro sovereign debt crisis, i.e. the so-called periphery countries of Southern Europe, including Greece, Italy, Portugal, and Spain (GIPS). The combined contribution of bond selection and timing casts doubt on the value of active management relative to its costs. The results also show that the reinforced home bias after the Euro sovereign debt crisis resulted in assorted management skills across these markets.