Short-Term Persistence in Mutual Fund Performance

Short-Term Persistence in Mutual Fund Performance We estimate parameters of standard stock selection and market timing models using daily mutual fund returns and quarterly measurement periods. We then rank funds quarterly by abnormal return and measure the performance of each decile the following quarter. The average abnormal return of the top decile in the post-ranking quarter is 39 basis points. The post-ranking abnormal return disappears when funds are evaluated over longer periods. These results suggest that superior performance is a short-lived phenomenon that is observable only when funds are evaluated several times a year. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

Short-Term Persistence in Mutual Fund Performance

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Publisher
Oxford University Press
Copyright
The Review of Financial Studies Vol. 18, No. 2 © 2004 The Society for Financial Studies; all rights reserved.
ISSN
0893-9454
eISSN
1465-7368
DOI
10.1093/rfs/hhi007
Publisher site
See Article on Publisher Site

Abstract

We estimate parameters of standard stock selection and market timing models using daily mutual fund returns and quarterly measurement periods. We then rank funds quarterly by abnormal return and measure the performance of each decile the following quarter. The average abnormal return of the top decile in the post-ranking quarter is 39 basis points. The post-ranking abnormal return disappears when funds are evaluated over longer periods. These results suggest that superior performance is a short-lived phenomenon that is observable only when funds are evaluated several times a year.

Journal

The Review of Financial StudiesOxford University Press

Published: Aug 25, 2005

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