Performance Persistence Research Articles

Hedge fund performance persistence under different business cycles and stock market regimes

We examine different aspects of performance persistence of US hedge funds over different business cycles and stock market regimes. During periods of economic growth and bull stock markets, we report performance persistence for up to one year in the risk-adjusted returns of fund portfolios of different investment strategies, which is mainly driven by top fund performers. Performance persistence weakens dramatically during recession periods and bear stock markets. Our results are robust to different combinations of states of economic growth and stock market regimes. Trading strategies constructed on the basis of our results confirm the economic significance of our findings.

Multimodal data for systolic and diastolic blood pressure prediction: The hypertension conscious artificial intelligence.

Multimodal data for systolic and diastolic blood pressure prediction: The hypertension conscious artificial intelligence.

Private Debt Fund Returns, Persistence, and Market Conditions

This paper examines net-of-fees private debt fund performance, performance persistence across funds managed by the same general partner and a general partner’s ability to time the market. We document that private debt funds outperform bond and equity market benchmarks in the cross-section, with high performance dispersion across strategies and performance quartiles. Lagged performance significantly affects current fund performance. While ex ante and ex post credit market conditions strongly affect fund performance, general partners can only partially time them.

Socially Responsible Bond ETFs in the US: A Performance Evaluation

This paper seeks to answer whether socially responsible bond Exchange Traded Funds (ETFs) in t he USA can outperform the main local aggregate bond and stock market indices. More specifically, the performance of 62 bond ETFs with Environmental, Social and Governance (ESG) Scores of 7/10 or above is assessed over the period 1/1/2018 - 31/12/2021. The sample has been selected based on data availability over the study period. Standard research methodology is applied including the single-factor market model and the risk -adjusted return metrics of Sharpe and Information ratios. Performance persistence is evaluated too. The findings show that, in raw return terms, the mean bond ETF underperforms the Bloomberg US Aggregate Bond Index and the S&P 500 Index. In addition, the examined ETFs cannot produce any material above-market return. Furthermore, daily returns seem to persist but weekly and monthly returns display a reverting behavior. A similar reverting behavior is observed between the annual return rankings of ETFs. Overall, our resu lts are in line with those findings in the literature that show, on average, ESG portfolios cannot beat the non-ESG peers on a consistent basis.

Recent evidence on the short-term and long-term performance persistence of emerging-market mutual fund returns

This paper analyzes the performance persistence of US-based emerging-market mutual funds. We use a sample of 275 actively managed funds between July 1989 and December 2020 and regress their returns on emerging-market benchmark portfolios. On average, the funds had a significant negative alpha. Contrary to some earlier evidence, we document that the short-term consistency is entirely driven by losses of underperforming funds. The return spread between the short-term winners and losers generates a significant positive alpha that can be fully explained by the momentum in emerging-market stocks. We find no evidence of any long-term regularities. Our findings show that the observed funds exhibit very similar behavior to their developed-market counterparts and may contribute to resolving some inconsistencies in the earlier results.

Significant hot hand effect in the game of cricket

We investigate the predictability and persistence of individual and team performance (hot-hand effect) by analyzing the complete recorded history of international cricket. We introduce an original temporal representation of performance streaks, which is suitable to be modelled as a self-exciting point process. We confirm the presence of predictability and hot-hands across the individual performance and the absence of the same in team performance and game outcome. Thus, Cricket is a game of skill for individuals and a game of chance for the teams. Our study contributes to recent historiographical debates concerning the presence of persistence in individual and collective productivity and success. The introduction of several metrics and methods can be useful to test and exploit clustering of performance in the study of human behavior and design of algorithms for predicting success.

Morningstar Star ratings and the performance, risk and flows of European bond mutual funds

In this paper we evaluate the relation between Morningstar Star ratings and the performance, risk and flows of European bond funds over the period 2006–2019 based on a comprehensive and survivorship-free dataset comprising 939 mutual funds. Fund performance is evaluated by net and gross returns, as well as alphas based on single and multi-factor models. Our results show that well-rated mutual funds exhibit superior performance even after controlling for differences in fund characteristics although they exhibit high risks both in terms of volatility and value-at-risk. We also find strong evidence of fund performance persistence and rating persistence. Finally, Morningstar Star ratings are also useful for explaining inflows and outflows. Funds with higher ratings attract more flows even if we control for prior performance.

Performance Evaluation, Factor Models, and Portfolio Strategies: Evidence from Chinese Mutual Funds

Actively managed stock mutual funds in the Chinese A-share market offer good investment opportunities. In aggregate, they outperform stock market indexes. Individual funds show a wide cross-sectional dispersion in performance, with the best funds offering economically large risk-adjusted returns that persist over time. Performance persistence observed at the individual fund level is robust to various factor-model specifications. A portfolio of the top-performing funds offers an improved investment opportunity compared with a portfolio of all funds. Hedging out market risk in this portfolio increases the Sharpe ratio, lowers volatility, and reduces tail risk. These results suggest that, in the young and still-developing Chinese A-share market, mutual funds can add value for investors.

Persistence of Large-Cap Equity Funds performance, market timing ability, and selectivity: evidence from India

Persistence of Large-Cap Equity Funds performance, market timing ability, and selectivity: evidence from India

Mutual Funds’ Cost Persistence

Abstract The research aimed to check whether investment fund managers maintain costs similarly from period to period. The research verified the hypothesis that managers maintain costs in the subsequent periods at a similar level. The study used a method based on contingency tables which are used to analyse the persistence of performance. In this study, we replaced performance with costs, assuming that managers also control these values. Costs were defined as: (1) total costs, (2) total costs minus management fees and (3) active management costs (expressed as the active expense ratio). Based on the results obtained, it should be stated that managers maintain costs at a similar level from period to period in the case of the split using the median. On the other hand, the results indicate that the costs were not maintained at a similar level in subsequent periods when broken down into quartiles. Considering the detailed results for funds divided into quartiles, it is clearly visible that most managers keep the costs close to the average value. Less frequently, costs from period to period are changed to be allocated to the extreme quartiles.

Permanent private equity: Market performance and transactions

AbstractUsing market data for a comprehensive sample of publicly listed permanent capital private equity funds, I confirm existing results in the private equity literature and establish new empirical facts for private equity investments. Over 2000–2019, only mezzanine funds outperformed public markets, whereas buyout, growth, and funds of funds underperformed somewhat, and venture capital funds underperformed significantly. Buyout funds exhibit performance persistence. Larger funds with higher asset turnover have higher performance, and funds with higher expenses have lower performance. Finally, contemporaneous and out‐of‐sample performance of buyout and mezzanine funds is associated with deal and exit transaction characteristics.

Industry Competition and Performance Persistence in Brazilian Equity Mutual Funds

Industry Competition and Performance Persistence in Brazilian Equity Mutual Funds

Does prospect theory explain mutual fund performance? Evidence from China

We empirically investigate the role of prospect theory in explaining mutual fund performance. Using a comprehensive open-ended equity fund dataset in China covering a period from 2004 to 2017, we construct a fund-level prospect theory value (TK) measure and find that it positively and significantly predicts future fund performance. This predictive power cannot be explained by existing risk factors or other fund characteristics. High TK funds also attract higher net fund inflows. Both performance persistence and price impact contribute to the fund performance predictability. Comprehensive robustness checks support our main findings.

Hedge fund sales fees and the flow of funds around the world

This paper presents evidence on hedge fund sales fees (sometimes viewed as “kickbacks”) around the world. Using a novel dataset of onshore and offshore Hedge Funds from 69 countries, over the time period 1998–2020, we show that sales fees have been extremely common, particularly among offshore funds. Also, we show the use of sales fees was more common in the 1990s and has dropped off in the 2000s and 2010s. We present evidence that shows sales fees impact fund sales but not fund performance. Sales fees flatten the flow-performance relationship, meaning that capital is less likely to leave a fund in response to poor performance, and this reduction is due to sales fees. Funds with sales fees have significantly more performance persistence since they are less likely to see larger capital withdraws. We present a wide array of robustness checks and discuss policy implications associated with the use and reporting of sales fees.

Mutual fund performance persistence: Factor models and portfolio size

We re-examine US mutual fund performance persistence. We investigate persistence (i) using both “academic” factor models and “practitioner” index models, (ii) using decile-size recursive portfolios and also portfolios formed from smaller numbers of funds, (iii) using nonparametric bootstrap p-values as well as conventional t-tests and (iv) using both net-of-fee fund returns (net alphas) and gross alphas. Our key result is that positive net alpha performance persistence can be found using small portfolios of funds together with a holding period of 6 months or less, for both practitioner index models and academic factor models.

The role of CEOs' human capital in sustaining superior performance–empirical evidence from China

PurposeFocusing on the important representative of firm intellectual capital (IC), this research explores the effects of chief executive officer’s (CEOs') managerial human capitals on sustaining superior performance in Chinese transition economy to prove the dynamic and strategic value of IC and fulfill the gap of lacking emerging market studies in this research field.Design/methodology/approachBased on dynamic managerial capability theoretical framework, the authors propose a dynamic management path to analyze the influencing mechanism of CEOs' managerial human capitals to firm performance persistence and the moderating effect of environment uncertainty. Using a panel data of Chinese publicly listed firms from 2008 to 2017, it adopts dynamic first-order autoregressive models to examine these hypotheses. Several tests are conducted to further analyze and ensure that the results are robust and reliable.FindingsThese managerial human capitals reveal heterogenous impacts on sustaining superior performance, and environment uncertainty is a valid moderating variable to further distinguish their dynamic values. The supplementary analyses show the integrating effect of an MBA degree and output functional experience is positive and significant, and the results in Chinese state-owned and private firm subsamples are distinct.Practical implicationsIt is beneficial for corporate stakeholders to judge and select CEOs and for policymakers to improve the efficiency advantage of IC in Chinese emerging market.Originality/valueThis study first explores the relationship between CEOs' managerial human capitals and superior performance persistence. Through introducing a dynamic perspective, it has extended existing performance persistence research into individual level and provided a new intellectual source of sustainable competitive advantages.

Selection ability, timing ability, and performance persistence of Indian fixed income mutual funds

Selection ability, timing ability, and performance persistence of Indian fixed income mutual funds

Manager characteristics: Predicting fund performance

A great deal of research effort has sought to understand whether fund managers have skill. However, most of this research draws inferences from fund returns attributable to funds that may have been managed by many different managers over the years. In this paper we focus on the fund manager. We put together a comprehensive data base of manager returns, including a time series of managers' career returns, concatenating performance from the different funds that a manager may have managed over time. We relate these returns to the characteristics of the managers as we seek to understand whether these characteristics have an impact on: manager skill; manager style; and on performance persistence.

Active Share and the Predictability of the Performance of Separate Accounts

Separate accounts are a large and unique, but understudied, part of the investment management industry. Within our sample, on net, the average separate account underperforms, but for those with high active share, we find positive performance persistence. Among high active share separate accounts, a portfolio of those with strong past performance has a subsequent net alpha of 1.38% per year (t = 2.11). That result strengthens when return dispersion is high and among separate accounts with a small cap style, a fundamental investment approach, or lower cash holdings. These results provide out-of-sample support for the predictive utility of active share.

Performance Persistence. An Examination of US Closed-End Funds

Performance Persistence. An Examination of US Closed-End Funds