Asymmetric Impact of Fed Rate Cuts on Growth and Value Mutual Fund Performance

This study investigates how U.S. Federal Reserve interest rate cuts during the 2019–2020 easing cycle influenced the performance of equity mutual funds, with a particular emphasis on contrast between growth and value investment styles. Using an event study framework, we examine abnormal returns, cumulative abnormal returns, and risk-adjusted performance metrics, including those based on both 30 days static and rolling Jensen’s alpha and Sharpe ratios, across short-term (30-day) and long-term (6-month and 1-year) windows surrounding three major rate cut events. Our empirical results show that growth funds significantly outperform value funds following rate reductions, especially over longer horizons. This performance advantage is more pronounced in risk-adjusted measures and strengthens when incorporating rolling dynamics, indicating that and asymmetric sensitivity of fund styles to interest rate changes, shaped by differences in duration exposure and investor sentiment. Overall, this study offers novel insights into how monetary policy influences fund-level dynamics beyond broad market movements and deepens the understanding of monetary transmission in asset management by incorporating time-varying performance metrics.