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Forecasting mutual fund performance: Combining return-based with portfolio holdings-based predictors

Author

Listed:
  • Müller, Sebastian
  • Pugachyov, Nikolay
  • Weigert, Florian

Abstract

We introduce a simple yet powerful method for enhancing mutual fund performance prediction by combining individual predictors into a composite predictor. This composite approach integrates information from 19 well-established return-based and portfolio holdings-based predictors from the literature. It effectively identifies top decile funds that outperform bottom decile funds by a risk-adjusted 4.56% per annum. Furthermore, it achieves statistically significant outperformance for long-only fund investments against the average active and passive fund. Both return-based predictors (e.g., fund alpha and the t-statistic of alpha) and holdings-based predictors (e.g., skill index and active weight) contribute equally to the composite predictor's success.

Suggested Citation

  • Müller, Sebastian & Pugachyov, Nikolay & Weigert, Florian, 2026. "Forecasting mutual fund performance: Combining return-based with portfolio holdings-based predictors," CFR Working Papers 26-01, University of Cologne, Centre for Financial Research (CFR).
    • Handle: RePEc:zbw:cfrwps:336774
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    References listed on IDEAS

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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