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On the robustness of persistence in mutual fund performance

Author

Listed:
  • Juan Carlos Matallín-Sáez

    (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain)

  • Amparo Soler-Domínguez

    (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain)

  • Emili Tortosa-Ausina

    (IVIE and Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

This paper analyzes persistence in US equity mutual fund performance over the period 2001-2011 for both net and gross returns. We apply commonly-used measures of persistence, which we test using a set of simulated passive funds. In the first stage we apply contingency tables and transition matrices in accordance with previous literature. Results show how these methodologies are biased towards finding evidence of persistence too easily. In the second stage, we take a recursive portfolio approach, which assesses the performance of investing by following recommendations based on past performance. Results show the importance of both estimating persistence by distinguishing among fund style groups, and considering the cross-sectional significance of recursive portfolios. In general, our results do not support evidence of persistence in mutual fund performance. Only very scarce evidence is found in some particular cases, but this is partly conditioned by whether net or gross returns are considered. We also find evidence supporting the relatively worse performance of non-survivor funds compared with that of survivor funds.

Suggested Citation

  • Juan Carlos Matallín-Sáez & Amparo Soler-Domínguez & Emili Tortosa-Ausina, 2014. "On the robustness of persistence in mutual fund performance," Working Papers 2014/01, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2014/01
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    3. Hafinaz Hasniyanti Hassan, 2018. "Conceptual Framework for the Determinants of Mutual Fund Performance in Malaysia," GATR Journals jfbr146, Global Academy of Training and Research (GATR) Enterprise.
    4. Qureshi, Fiza & Kutan, Ali M. & Ghafoor, Abdul & Hussain Khan, Habib & Qureshi, Zeeshan, 2019. "Dynamics of mutual funds and stock markets in Asian developing economies," Journal of Asian Economics, Elsevier, vol. 65(C).
    5. Dachen Sheng & Heather A. Montgomery, 2024. "Assessing Mutual Fund Performance in China: A Sector Weight-Based Approach," Mathematics, MDPI, vol. 12(16), pages 1-21, August.
    6. Zhou, Zhongbao & Xiao, Helu & Jin, Qianying & Liu, Wenbin, 2018. "DEA frontier improvement and portfolio rebalancing: An application of China mutual funds on considering sustainability information disclosure," European Journal of Operational Research, Elsevier, vol. 269(1), pages 111-131.

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    More about this item

    Keywords

    mutual fund; performance; persistence; robustness;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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