Publication Type
Working Paper
Version
publishedVersion
Publication Date
11-2001
Abstract
The literature on mutual fund persistence took a hit with the finding that one-year stock momentum and expense ratios account for most of the persistence in mutual fund performance (Carhart, 1992; Carhart, 1997). However, since equity mutual funds are grouped into styles (e.g., large value, small growth, mid-cap growth, etc.) and are often confined to trading stocks within their style, one should measure fund performance relative to style when investigating managerial ability. Using CRSP mutual fund data and a methodology similar to Carhart (1997), we find that differences in style-adjusted fund returns persist for up to six years. Neither one-year momentum nor expense ratios explain our results. Our results are also robust to controlling for size, book-to-market equity, load, and total net assets. Since manager tenure is about four years, our results suggest that managerial ability may not be as dead as it seems.
Keywords
mutual funds, style, persistence, ability, managerial ability, fund, style-adjusted, performance
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
First Page
1
Last Page
38
Identifier
10.2139/ssrn.291372
Publisher
SSRN
Citation
TEO, Melvyn and WOO, Sung-Jun.
Persistence in style-adjusted mutual fund returns. (2001). 1-38.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5165
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.291372