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Hot Hands in Mutual Funds: Short‐Run Persistence of Relative Performance, 1974–1988
Author(s) -
HENDRICKS DARRYLL,
PATEL JAYENDU,
ZECKHAUSER RICHARD
Publication year - 1993
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1993.tb04703.x
Subject(s) - persistence (discontinuity) , survivorship curve , horizon , econometrics , statistics , term (time) , demographic economics , set (abstract data type) , economics , actuarial science , psychology , mathematics , demography , computer science , engineering , population , physics , geotechnical engineering , geometry , quantum mechanics , sociology , programming language
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 portfolios is six to eight percent per year. These results are not attributable to known anomalies or survivorship bias. Investigations with a different (previously used) data set and with some post‐1988 data confirm the finding of persistence.