Accounting and Finance 46 (2006) 347–363
New Zealand mutual funds: measuring performance
and persistence in performance
, Alireza Tourani Rad
ABP Investments and Limburg Institute of Financial Economics, Maastricht University,
6200 MD Maastricht, the Netherlands
Limburg Institute of Financial Economics, Maastricht University, 6200 MD Maastricht,
Faculty of Business, Auckland University of Technology, Auckland, New Zealand
The present study investigates the performance of New Zealand mutual funds using
a survivorship-bias controlled sample of 143 funds for the period of 1990–2003.
Our overall results suggest that New Zealand mutual funds have not been able to
provide out-performance. Alphas for equity funds, both domestic and international,
are insigniﬁcantly different from zero, whereas balanced funds underperform signif-
icantly. There is no evidence of timing abilities by the fund managers. In the short
term, signiﬁcant evidence of return persistence for all funds is observed. This persis-
tence, however, is driven by ‘icy hands’ rather than ‘hot hands’. Finally, we ﬁnd the
risk-adjusted performance for equity funds to be positively related to fund size and
expense ratio and negatively related to load charges.
Key words: Mutual funds; Performance evaluation
JEL classiﬁcation: G12, G20, G23
The performance of mutual funds has been examined widely in the published
ﬁnance literature both theoretically and empirically. The majority of earlier studies
We would like to thank two anonymous referees and the editor of Accounting and Finance,
David Gallagher, Imtiaz Mazumder and participants at the 17th Australasian Banking and
Finance Conference, Sydney, 2004, the 9th meeting of the New Zealand Finance Colloquium,
Wellington, 2005, for their helpful comments. Aaron Gilbert’s assistance in the collection of
the dataset is acknowledged. Any remaining errors are the sole responsibility of the authors.
The views expressed in the present paper are not necessarily shared by ABP Investments.
Received 16 November 2004; accepted 21 June 2005 by Robert Faff (Editor).