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Hot Hands in Mutual Funds: Short-Run Persistence of Relative Performance, 1974-1988

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  • Hendricks, Darryll
  • Patel, Jayendu
  • Zeckhauser, Richard

Abstract

The relative performance of no-load, growth-oriented mutual funds persists in the near term, with the strongest evidence for a one-year evaluation horizon. Portfolios of recent poor performers do significantly worse than standard benchmarks; those of recent top performers do better, though not significantly so. The difference in risk-adjusted performance between the top and bottom octile portfoli os is six to eight percent per year. These results are not attributable to known anomalies or survivorship bias. Investigations with a differen t (previously used) data set and with some post-1988 data confirm the finding of persistence. Copyright 1993 by American Finance Association.

Suggested Citation

  • Hendricks, Darryll & Patel, Jayendu & Zeckhauser, Richard, 1993. "Hot Hands in Mutual Funds: Short-Run Persistence of Relative Performance, 1974-1988," Journal of Finance, American Finance Association, vol. 48(1), pages 93-130, March.
    • Handle: RePEc:bla:jfinan:v:48:y:1993:i:1:p:93-130
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