Abstract
The existing literature of performance persistence of UK investment trusts is limited. We are going to use a sample of 210 UK investment trusts to test performance persistence in different time periods. Berk and Green (2004) suggests that performance persistence and managerial skill are limited if the assumptions of perfect capital markets and decreasing returns to scale in fund management hold. We sort funds into rank portfolios based on past performance. When funds are sorted into deciles portfolios, the statistical test that is used is Spearman rank correlation coefficient. Funds during the third year show a negative and statistically significant correlation coefficient, which is an evidence of weak performance persistence of funds that showed negative and bad performance during the short-term of the first three years.
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