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On Persistence in Mutual Fund Performance

Mark M. Carhart
GSAM Quantitative Strategies Group

J. OF FINANCE, Vol. 52 No. 1, March 1997

Abstract:
Using a sample free of survivor bias, I demonstrate that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual funds' mean and risk-adjusted returns. Hendricks, Patel and Zeckhauser's (1993) "hot hands" result is mostly driven by the one-year momentum effect of Jegadeesh and Titman (1993), but individual funds do not earn higher returns from following the momentum strategy in stocks. The only significant persistence not explained is concentrated in strong underperformance by the worst-return mutual funds. The results do not support the existence of skilled or informed mutual fund portfolio managers.

JEL Classifications: G11

Accepted Paper Series

Date posted: January 15, 1997 ; Last revised: January 21, 1998

Suggested Citation

Carhart, Mark M.,On Persistence in Mutual Fund Performance. J. OF FINANCE, Vol. 52 No. 1, March 1997 Available at SSRN: http://ssrn.com/abstract=8036

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Contact Information

Mark M. Carhart (Contact Author)

GSAM Quantitative Strategies Group ( email )

32 Old Slip, 23rd Floor
New York, NY 10005
United States
(212) 357-5993 (Phone)
(212) 493-0726 (Fax)