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File name: SSRN-id2173302. ; Size: 192K
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Mutual Fund's R2 as Predictor of Performance
Yakov Amihud
New York University - Stern School of Business
Ruslan Goyenko
McGill University - Desautels Faculty of Management
October 23, 2012
Forthcoming, Review of Financial Studies
Abstract:
We propose that fund performance can be predicted by its R2, obtained from a regression of its returns on a multi-factor benchmark model. Lower R2 indicates greater selectivity and it significantly predicts better performance. Stock funds sorted into lowest-quintile lagged R2 and highest-quintile lagged alpha produce significant annual alpha of 3.8%. Across funds, R2 is positively associated with fund size and negatively associated with its expenses and manager’s tenure.
Number of Pages in PDF File: 49
Accepted Paper Series
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Date posted: December 24, 2008
; Last revised: November 10, 2012
Suggested CitationAmihud, Yakov and Goyenko, Ruslan, Mutual Fund's R2 as Predictor of Performance (October 23, 2012). Forthcoming, Review of Financial Studies. Available at SSRN: http://ssrn.com/abstract=1319786 or http://dx.doi.org/10.2139/ssrn.1319786
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