The Persistence of Risk-Adjusted Mutual Fund Performance

42 Pages Posted: 11 Nov 2008  

Edwin J. Elton

New York University (NYU) - Department of Finance

Martin J. Gruber

New York University (NYU) - Department of Finance

Christopher R. Blake

Gabelli School of Business, Fordham University

Multiple version iconThere are 3 versions of this paper

Date Written: May 1995

Abstract

There is overwhelming evidence that, post expenses, mutual fund managers on average underperform a combination of passive portfolios of similar risk. The recent increase in the number and types of index funds that are available to individual investors makes this a matter of practical as well as theoretical significance. Numerous index funds, which track the S&P 500 index or various small-stock, bond, value, growth, or international indexes, are now widely available to individual investors. These same choices have been available to institutional investors for some time. Given that there are sufficient index funds to span most investors risk choices, that the index funds are available at low cost, and that the low cost of index funds means that a combination of index funds is likely to outperform an active fund of similar risk, the question is, why select an actively managed fund?

Suggested Citation

Elton, Edwin J. and Gruber, Martin J. and Blake, Christopher R., The Persistence of Risk-Adjusted Mutual Fund Performance (May 1995). NYU Working Paper No. FIN-95-018. Available at SSRN: https://ssrn.com/abstract=1298325

Edwin J. Elton (Contact Author)

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0361 (Phone)
212-995-4233 (Fax)

Martin J. Gruber

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0333 (Phone)
212-995-4233 (Fax)

Christopher R. Blake

Gabelli School of Business, Fordham University ( email )

113 West 60th Street
Lowenstein Building
New York, NY 10023
United States
212-636-6750 (Phone)

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