Performance and Characteristics of Mutual Fund Starts

The European Journal of Finance (2009, Vol.15)

37 Pages Posted: 11 Dec 2008 Last revised: 28 Jun 2014

See all articles by Aymen Karoui

Aymen Karoui

York University

Iwan Meier

HEC Montreal - Department of Finance

Date Written: August 19, 2008


We study the performance and portfolio characteristics of 828 newly launched U.S. equity mutual funds over the time period 1991-2005. These fund starts initially earn, on average, higher excess returns and higher abnormal returns. Their risk-adjusted performance is also superior to existing funds. Furthermore, we provide evidence for short-term persistence among top performing fund starts, however, a substantial fraction of funds drop from the top to the bottom decile over two subsequent periods. We find that returns of fund starts indeed exhibit higher total and unsystematic risk. Portfolios of new funds are typically also less diversified in terms of number of stocks and industry concentration and are invested in smaller and less liquid stocks.

Keywords: Mutual funds, Fund starts; Performance evaluation; Performance persistence

JEL Classification: G11, G12, G23

Suggested Citation

Karoui, Aymen and Meier, Iwan, Performance and Characteristics of Mutual Fund Starts (August 19, 2008). The European Journal of Finance (2009, Vol.15), Available at SSRN: or

Aymen Karoui

York University ( email )

2275, avenue Bayview
Toronto, Ontario M4N 3M6

Iwan Meier (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7 H2J 2K9
(514) 340-3198 (Phone)

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