Cross-sectional learning and short-run persistence in mutual fund performance

Using monthly return data of more than 6,400 US equity mutual funds we investigate short-run performance persistence over the period 1984{2003. We sort funds into rank portfolios based on past performance, and evaluate the portfolios’ out-of-sample performance. To cope with short ranking periods, we employ an empirical Bayes approach tomeasure past performance more e±ciently. Our main finding is that when funds are sorted into decile portfolios based on 12-month ranking periods, the top decile of funds earns astatistically significant, abnormal return of 0.26 percent per month. This effect persists beyond load fees, and is mainly concentrated in relatively young, small cap/growth funds.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

MORE ABOUT NETSPAR


Mission en strategy           •           Network           •           Organisation           •          Magazine
Netspar Brief            •            Actionplan 2019-2023           •           Researchagenda

ABOUT NETSPAR

Our partners

B20180327_logo_PGB-Pensioendiensten_grijswaarden
B20160708_aegon
B20160708_maastricht university
B20160708_B20160615_Stichting-van-de-Arbeid-logo
B20160708_radboud
View all partners