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What determines fund performance persistence? International evidence
Author(s) -
Ferreira Miguel A.,
Keswani Aneel,
Miguel António F.,
Ramos Sofia B.
Publication year - 2019
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12202
Subject(s) - persistence (discontinuity) , equity (law) , mutual fund , intuition , open end fund , index fund , income fund , economics , closed end fund , business , monetary economics , fund of funds , target date fund , fund administration , manager of managers fund , finance , institutional investor , political science , psychology , corporate governance , geotechnical engineering , market liquidity , law , engineering , cognitive science
We study performance persistence across a global sample of equity mutual funds from 27 countries. In contrast to the existing U.S.‐based evidence, we find that net performance persistence is present in the majority of fund industries, suggesting that fund manager skill is commonplace rather than a rarity. Consistent with the intuition that more competition in the mutual fund industry makes remaining a winner fund less likely but keeping a loser fund at the bottom of the performance ranks more probable, we show that competitiveness explains the cross‐sectional variation in performance persistence.