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American equity mutual funds in European markets: Hot hands phenomenon and style analysis

  • Stephanos Papadamou

    (Department of Applied Informatics, University of Macedonia, Greece)

  • Costas Siriopoulos

    (Department of Business Administration, University of Patras, Greece)

We studied empirically American no-load equity mutual funds that invest in European stocks and keep their managers for more than three years, in order to investigate the persistence of the short-term performance, and the related investment style. The results showed an underperformance compared to the Eurostoxx index and a 'hot hands' phenomenon does not persist, with some exceptions. Mutual funds that performed well in a five-month evaluation period continued to generate superior performance in the next four months. According to style analysis a portfolio constructed by growth-large, growth-medium and value-large capitalization stocks outperformed any other investment style. However, well-diversified funds were the most mean-variance efficient, style-consistent funds. Copyright © 2004 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.233
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 9 (2004)
Issue (Month): 2 ()
Pages: 85-97

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Handle: RePEc:ijf:ijfiec:v:9:y:2004:i:2:p:85-97
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  1. Engstrom, Stefan, 2003. "Costly information, diversification and international mutual fund performance," Pacific-Basin Finance Journal, Elsevier, vol. 11(4), pages 463-482, September.
  2. Droms, William G & Walker, David A, 1994. "Investment Performance of International Mutual Funds," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(1), pages 1-14, Spring.
  3. William F. Sharpe, 1965. "Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 39, pages 119.
  4. Cumby, Robert E & Glen, Jack D, 1990. " Evaluating the Performance of International Mutual Funds," Journal of Finance, American Finance Association, vol. 45(2), pages 497-521, June.
  5. French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-26, May.
  6. Plantinga, Auke & Scholtens, Bert, 2001. "Socially responsible investing and management style of mutual funds in the euronext stock markets," Research Report 01E17, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  7. Asani Sarkar & Kai Li, 2002. "Should U.S. investors hold foreign stocks?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 8(Mar).
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