A Simple but Effective Way to Identify Persistent Performances Among Actively-managed Mutual Funds

39 Pages Posted: 18 Mar 2011 Last revised: 14 Aug 2012

See all articles by Y. Peter Chung

Y. Peter Chung

University of California at Riverside

Sukwon Thomas Kim

Independent

Date Written: March 25, 2012

Abstract

We show the number of stocks contributing to the overall performance of an actively managed mutual fund is related to the persistency of the fund performance. Among the funds that have similar risk-adjusted returns, the funds that rely on a few high return stocks underperform the funds that hold many above-median return stocks. The difference between two groups is as large as 8% annual risk-adjusted return empirically. This result holds throughout our sample period, and is not generated by survivorship bias, look-back bias, or fund expenses.

Keywords: Mutual Fund, Holdings Data, Luck vs. Skill, Performance evaluation, Skewness

JEL Classification: G10, G11, G23

Suggested Citation

Chung, Y. Peter and Kim, Sukwon, A Simple but Effective Way to Identify Persistent Performances Among Actively-managed Mutual Funds (March 25, 2012). Available at SSRN: https://ssrn.com/abstract=1787334 or http://dx.doi.org/10.2139/ssrn.1787334

Y. Peter Chung (Contact Author)

University of California at Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States
909-787-3906 (Phone)
909-787-2933 (Fax)

Sukwon Kim

Independent

No Address Available

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