We explore performance persistence in mutual funds using absolute and relative benchmarks. Our sample, largely free of survivorship bias, indicates that relative risk-adjusted performance of mutual funds persists, however persistence is mostly due to funds that lag the S&P 500. A profit analysis indicates that poor performance increases the probability of disappearance. A year-by-year decomposition of the persistence effect demonstrates that the relative performance pattern depends upon the time period observed, and it is correlated across managers. Consequently, it is due to a common strategy that is not captured by standard stylistic categories, or risk adjustment procedures.
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Article
Brown, Stephen J & Goetzmann, William N, 1995.
" Performance Persistence,"
Journal of Finance,
American Finance Association, vol. 50(2), pages 679-98, June.
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Find related papers by JEL classification: G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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