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Mutual Fund's R-super-2 as Predictor of Performance

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  • Yakov Amihud
  • Ruslan Goyenko

Abstract

We propose that fund performance can be predicted by its R-super-2, obtained from a regression of its returns on a multifactor benchmark model. Lower R-super-2 indicates greater selectivity, and it significantly predicts better performance. Stock funds sorted into lowest-quintile lagged R-super-2 and highest-quintile lagged alpha produce significant annual alpha of 3.8%. Across funds, R-super-2 is positively associated with fund size and negatively associated with its expenses and manager's tenure. The Author 2013. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Suggested Citation

  • Yakov Amihud & Ruslan Goyenko, 2013. "Mutual Fund's R-super-2 as Predictor of Performance," The Review of Financial Studies, Society for Financial Studies, vol. 26(3), pages 667-694.
    • Handle: RePEc:oup:rfinst:v:26:y:2013:i:3:p:667-694
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    File URL: http://hdl.handle.net/10.1093/rfs/hhs182
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    Cited by:

    1. Mazur, Mieszko & Salganik-Shoshan, Galla & Zagonov, Maxim, 2017. "Comparing performance sensitivity of retail and institutional mutual funds’ investment flows," Finance Research Letters, Elsevier, vol. 22(C), pages 66-73.
    2. Dannhauser, Caitlin D. & Spilker, Harold D., 2023. "The Modern Mutual Fund Family," Journal of Financial Economics, Elsevier, vol. 148(1), pages 1-20.
    3. Harry Flam & Roine Vestman, 2017. "Swedish Equity Mutual Funds 1993-2013: Performance, Persistence and Presence of Skill," CESifo Working Paper Series 6713, CESifo.
    4. George J. Jiang & Tong Yao & Gulnara R. Zaynutdinova, 2023. "The effect of investor service costs on mutual fund performance," The Financial Review, Eastern Finance Association, vol. 58(1), pages 91-115, February.

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