Evaluating the Rating of Stiftung Warentest: How Good are Mutual Fund Ratings and Can They Be Improved?

29 Pages Posted: 15 Mar 2014

See all articles by Sebastian Müller

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management

Martin Weber

University of Mannheim - Department of Banking and Finance

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Date Written: March 2014

Abstract

We test the abilities of the Stiftung Warentest fund rating system to predict future fund performance among German registered funds for six equity categories: Germany, Euro‐Zone, Europe, North America, Pacific and World. Stiftung Warentest is a consumer protection agency and a major provider of fund ratings in Germany. Our empirical analysis documents predictive abilities of the rating system. The reason is that measures of past performance are positively related to future performance in several of these markets, even after controlling for momentum. Measures of fund activity (e.g., Active Share) are also helpful to predict performance, in particular to identify likely future losers. Hence, they should be taken into consideration by consumers when selecting a fund and rating agencies when revising current rating methodologies.

Keywords: mutual funds, performance evaluation, performance persistence, mutual fund ratings, active management

Suggested Citation

Müller, Sebastian and Weber, Martin, Evaluating the Rating of Stiftung Warentest: How Good are Mutual Fund Ratings and Can They Be Improved? (March 2014). European Financial Management, Vol. 20, Issue 2, pp. 207-235, 2014, Available at SSRN: https://ssrn.com/abstract=2409354 or http://dx.doi.org/10.1111/j.1468-036X.2011.00632.x

Sebastian Müller (Contact Author)

Technische Universität München (TUM) - TUM School of Management ( email )

Germany

Martin Weber

University of Mannheim - Department of Banking and Finance ( email )

D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)

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