Abstract

http://ssrn.com/abstract=962829
 
 

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Short-Term Persistence in Mutual Funds Performance: Evidence from India


Sanjay Sehgal


University of Delhi - Department of Financial Studies

Manoj Jhanwar


affiliation not provided to SSRN

December 18, 2007

10th Capital Markets Conference, Indian Institute of Capital Markets

Abstract:     
In this paper, we examine if there is any short-term persistence in mutual funds performance in the Indian context. We find no evidence that confirms persistence using monthly data. Using daily data, we observe that for fund schemes sorted on prior period four-factor abnormal returns, the winners portfolio does provide gross abnormal returns of 10% per annum on post-formation basis. The economic feasibility of zero-investment trading strategies that involve buying past winners and selling past losers is however in doubt. This is owing to the fact that these strategies generate low gross returns and that the winners portfolios involve higher investment costs than losers portfolios, thus destroying a major portion of extra-normal returns. Our empirical findings are consistent with the efficient market hypothesis and have implications for hedge funds and other managed portfolios who rely on innovative investment styles, including the fund of funds trading strategies that implicitly assume short-term persistence.

Number of Pages in PDF File: 23

Keywords: Mutual Funds, Fama- French Model, Performance Evaluation, Multifactor Asset Pricing, Short Term Persistence, Hedge Funds.

JEL Classification: C12, C13, C51, G11, G12, G23

working papers series


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Date posted: February 13, 2007  

Suggested Citation

Sehgal, Sanjay and Jhanwar, Manoj, Short-Term Persistence in Mutual Funds Performance: Evidence from India (December 18, 2007). 10th Capital Markets Conference, Indian Institute of Capital Markets. Available at SSRN: http://ssrn.com/abstract=962829 or http://dx.doi.org/10.2139/ssrn.962829

Contact Information

Sanjay Sehgal (Contact Author)
University of Delhi - Department of Financial Studies ( email )
University Road
Delhi, 110 007
India
Manoj Jhanwar
affiliation not provided to SSRN ( email )
No Address Available
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