Fund Rating Systems and Performance Predictability

17 Pages Posted: 18 Apr 2008

See all articles by Anne-Sophie Duret

Anne-Sophie Duret

affiliation not provided to SSRN

Pierre Hereil

affiliation not provided to SSRN

Philippe Mitaine

affiliation not provided to SSRN

Nicolas Moussavi

affiliation not provided to SSRN

Thierry Roncalli

Amundi Asset Management; University of Evry

Date Written: April 16, 2008

Abstract

This paper studies the performance predictability of external fund rating systems. Most investors use 5 stars rated funds to build their portfolios. The underlying idea is that funds which were the best during the last three years will be better performers than the other funds in the future. It implies that the 5 stars rating is a good persistence measure of the performance. Using a Markov modelling and the seminal empirical work of Garnier and Pujol (2007), we show that ratings persistence is poor. It means that fund selection or a fund picking process may not be reduced to choose funds in a 5 stars rated universe.

Keywords: fund ratings, performance predictability, markov generator, transition matrix, hurst exponent, fund picking, statistical persistence

JEL Classification: G0

Suggested Citation

Duret, Anne-Sophie and Hereil, Pierre and Mitaine, Philippe and Moussavi, Nicolas and Roncalli, Thierry, Fund Rating Systems and Performance Predictability (April 16, 2008). Available at SSRN: https://ssrn.com/abstract=1121383 or http://dx.doi.org/10.2139/ssrn.1121383

Anne-Sophie Duret

affiliation not provided to SSRN ( email )

Pierre Hereil

affiliation not provided to SSRN ( email )

Philippe Mitaine

affiliation not provided to SSRN ( email )

Nicolas Moussavi

affiliation not provided to SSRN ( email )

Thierry Roncalli (Contact Author)

Amundi Asset Management ( email )

90 Boulevard Pasteur
Paris, 75015
France

University of Evry ( email )

Boulevard Francois Mitterrand
F-91025 Evry Cedex
France

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
386
Abstract Views
1,588
rank
81,733
PlumX Metrics