Is There Performance Persistence After All? International Evidence

Posted: 6 Dec 2010 Last revised: 2 Jun 2019

See all articles by Aneel Keswani

Aneel Keswani

Faculty of Finance, Cass Business School, City University, London

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Antonio F. Miguel

Instituto Universitário de Lisboa (ISCTE - IUL)

Sofia Brito Ramos

ESSEC

Date Written: April 27, 2017

Abstract

The existing U.S. based literature and the Berk and Green (2004) model suggest that performance persistence and managerial skill are limited. We find significant persistence in most fund industries in a sample of open-end domestic equity mutual funds from 27 countries. Two factors explain why persistence in fund management is pervasive globally. First, flows into funds do not always decrease persistence as most countries do not have decreasing returns to scale in fund management. Second, the economic magnitude of the effect of flows on persistence is small even in the United States, where fund industry conditions most closely resemble the Berk and Green assumptions. This explains why persistence is present in most fund industries with even decreasing returns to scale. We find that differences in mutual fund industry development are responsible for returns to scale differences across countries.

Keywords: Mutual fund persistence, Mutual fund flows, Returns to scale, Berk and Green model

JEL Classification: G15, G23

Suggested Citation

Keswani, Aneel and Ferreira, Miguel Almeida and Miguel, Antonio Freitas and Ramos, Sofia Brito, Is There Performance Persistence After All? International Evidence (April 27, 2017). Available at SSRN: https://ssrn.com/abstract=1720348 or http://dx.doi.org/10.2139/ssrn.1720348

Aneel Keswani

Faculty of Finance, Cass Business School, City University, London ( email )

106 Bunhill Row
London EC1Y 8TZ
Great Britain
+44 207 040 8763 (Phone)

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Antonio Freitas Miguel

Instituto Universitário de Lisboa (ISCTE - IUL) ( email )

Av. das Forcas Armadas
Lisboa, 1649-026
Portugal
+351 217 903 000 (Phone)

Sofia Brito Ramos

ESSEC ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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