| Unexpected increases in a mutual fund's risk level could cause significant financial loss to an investor relying on that fund's risk consistency. The purpose of this study was to determine if domestic, A-share, large capitalization value income, and domestic, A-share, large capitalization growth and income mutual funds maintained a consistent level of risk in both a recessionary and an expansionary economy. As elderly and risk-averse investors may seek this fund category to a greater degree in a recession, substantial increases in risk levels could lead to large financial losses. Furthermore, losses by too many investors might negatively impact the domestic economy as a whole. A quantitative research design was employed to identify if the risk level of the selected mutual funds, as measured by their standard deviations, remained consistent in a recessionary economy as compared to a nonrecessionary economy. The database of Morningstar Incorporated, a professional data collection agency, was used to obtain historical data on each fund. Quantitative data of 60 funds over a 5-year period (2006-2011) were analyzed using the Wilcoxon signed rank test, which showed significant differences between the 2 periods' risks. This study promotes positive social change raising investors' awareness of possible risk level inconsistencies in this classification of mutual fund. It also offers support for further investigation on this topic by governmental agencies, as well as by banking and financial organizations, to better regulate the risk levels of this fund classification. |
