A New Perspective on Performance Persistence: Evidence Using Portfolio Holdings
34 Pages Posted: 13 Oct 2013 Last revised: 21 Sep 2015
Date Written: September 19, 2015
We investigate the existence and sources of performance persistence for Australian equity funds, using monthly portfolio holdings data. We find significant persistence among outperforming rather than underperforming funds, which is primarily related to security selection skill, and is associated with growth-orientated funds. Meanwhile the relation between persistence and momentum is secondary and nuanced. Further, persistence largely derives from existing holdings, while subsequent active trading contributes only moderately positive returns for both outperforming and underperforming funds. We also find that persistence fades beyond six-months, and vanishes after 24-months. Differences between these findings and those for U.S. equity funds imply that the existence and nature of persistence may depend on market context.
Keywords: performance persistence, active management, portfolio holdings, trades
JEL Classification: G23
Suggested Citation: Suggested Citation