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Is the rating given to a European mutual fund a good indicator of its future performance?

Author

Listed:
  • Vincent Fromentin

    (CEREFIGE - University of Lorraine)

  • Christine Louargant

    (CEREFIGE - University of Lorraine)

Abstract

The objective of this paper is to investigate whether the rating of a fund is a determinant of its future performance. This study focuses on the Fundclass ratings for a sample of 1,452 EU funds with a similar style of management for the period 2003–12 (a period marked by economic crisis). By using the methodology of non-stationary panel data, we simultaneously assess the long- and short-term relationship between fund performance and scoring, using a vector error correction model. Our results conclude that there is a positive relationship between these two variables over time. Nevertheless, in the short term, this relationship is only valid for the period 2007–12, especially for funds with a good rating.

Suggested Citation

  • Vincent Fromentin & Christine Louargant, 2014. "Is the rating given to a European mutual fund a good indicator of its future performance?," Economics Bulletin, AccessEcon, vol. 34(2), pages 1235-1246.
    • Handle: RePEc:ebl:ecbull:eb-14-00283
    as

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    References listed on IDEAS

    as
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    • G2 - Financial Economics - - Financial Institutions and Services

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