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Study On Mutual Funds Performance Persistence

Posted on:2007-09-16Degree:DoctorType:Dissertation
Country:ChinaCandidate:D H LiFull Text:PDF
GTID:1119360185451346Subject:Management Science and Engineering
Abstract/Summary:PDF Full Text Request
Persistence in mutual fund performance is well documented in financial literature. It refers to a fund manager's ability to consistently deliver investment return above or below a benchmark return, and is also called hot hand and icy hand phenomenon sometimes. The question of whether there is persistence in mutual funds has long been important, both for academic research and for practitioner, since the efficient market hypothesis implies that past performance is no guide to future performance. Most researches focus on the existence of persistence and explanation for persistence.This article first provides a comprehensive review of fund performance persistence.1. As for the hypothesis of the existence of persistence, four issues are introduced, such as the length of persistence and its stability, the persistence of non-stock funds, underperformance, and investment strategy using fund persistence.2. As for the explanation for persistence, four hypotheses are introduced, such as data quality hypothesis, stock momentum hypothesis, fund manager ability hypothesis, fees and taxation hypothesis.3. For the issue of persistence detecting, the method of cross-sectional regression and contingency table are traditionally used. Rank correlation approach and Kolmogorov-Smirnor test are also introduced in this article. In addition, potential improvements of these four methods are discussed.In the second part of article, we provide a new method for persistence detecting. The main contribution and innovation are:1. Provides a new method for persistence detecting, and confirms the existence of persistence among some funds, the degree of persistence is also studiedTraditional methods are ineffective when each individual fund is concerned. In this article we find that the method of scan statistics can be used to deal with this task efficiently. Up to now, scan statistics is a brand new method in persistence research.
Keywords/Search Tags:Mutual funds, Performance persistence, Survivorship bias, Stock momentum, Fund manager ability, Scan statistics, The longest run, Stochastic dominance
PDF Full Text Request
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