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Italian Equity Funds: Efficiency and Performance Persistence

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  • Roberto Casarin
  • Andrea Piva
  • Loriana Pelizzon

Abstract

Have Italian mutual funds been able to generate ‘extra-return’? Were some of them able to persistently beat the competitors? In this paper the authors address these questions and provide a detailed and systematic performance and return persistence analysis of the Italian equity mutual funds. The authors show that, in general, fund managers have not been able to score extra performances and only few managers have the stock picking ability or market timing ability. This evidence is consistent with the market efficiency hypothesis. Concerning performance persistence, firstly the study reveals absence of hot hand phenomenon on raw returns. The no persistence effect is fairly robust to the performance measure, the temporal lag and the different methodology employed for testing persistence. Secondly, there is no long-run persistence on risk-adjusted returns as the study found a weak evidence of the reversal effect. Finally, the past performance displays weak evidence of the hot hand effect on risk-adjusted returns on four-month intervals using cross-section tests. However, once the yearly intervals are analyzed, any evidence of persistence may disappear.

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Bibliographic Info

Article provided by IUP Publications in its journal The IUP Journal of Financial Economics.

Volume (Year): VI (2008)
Issue (Month): 1 (March)
Pages: 7-28

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Handle: RePEc:icf:icfjfe:v:06:y:2008:i:1:p:7-28

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References

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Citations

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Cited by:
  1. Keith Hooper & Howard Davey & Roger Su & Dani A.C. Foo, 2006. "Persistence in Mutual Fund Returns: New Zealand Evidence," Accounting Research Journal, Emerald Group Publishing, vol. 19(2), pages 105-121, September.
  2. Alessandro Fedele & Paolo Panteghini & Sergio Vergalli, 2009. "Optimal investment and financial strategies under tax rate uncertainty," Working Papers 0912, University of Brescia, Department of Economics.
  3. Alberto Bisin & John Geanakoplos & Piero Gottardi & Enrico Minelli & Heracles Polemarchakis, 2009. "Markets and Contracts," Working Papers 0915, University of Brescia, Department of Economics.
  4. Alessandro Fedele & Francesco Liucci & Andrea Mantovani, 2009. "Credit availability in the crisis: the European investment bank group," Working Papers 0913, University of Brescia, Department of Economics.
  5. Alessandra Del Boca & Michele Fratianni & Franco Spinelli & Carmine Trecroci, 2008. "The Phillips Curve and the Italian Lira, 1861-1998," Mo.Fi.R. Working Papers 8, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  6. Amporn SOONGSWANG & Yosawee SANOHDONTREE, 2011. "Equity Mutual Fund: Performances, Persistence and Fund Rankings," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(6), pages 27, October.
  7. Monica Billio & Roberto Casarin, 2010. "Bayesian Estimation of Stochastic-Transition Markov-Switching Models for Business Cycle Analysis," Working Papers 1002, University of Brescia, Department of Economics.
  8. Rosella Levaggi & Francesco Menoncin, 2009. "Decentralized provision of merit and impure public goods," Working Papers 0909, University of Brescia, Department of Economics.
  9. Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2009. "Competitive Markets with Private Information on Both Sides," Working Papers 0917, University of Brescia, Department of Economics.
  10. Francesco Menoncin & Paolo Panteghini, 2009. "Retrospective Capital Gains taxation in the real world," Working Papers 0910, University of Brescia, Department of Economics.
  11. Alessandro Fedele & Raffaele Miniaci, 2010. "Do Social Enterprises Finance Their Investments Differently from For-profit Firms? The Case of Social Residential Services in Italy," Journal of Social Entrepreneurship, Taylor & Francis Journals, vol. 1(2), pages 174-189, October.

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