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Italian Equity Funds: Efficiency and Performance Persistence

  • Roberto Casarin
  • Andrea Piva
  • Loriana Pelizzon

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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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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