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Swedish Equity Mutual Funds: Performance, Persistence and Presence of Skill

35 Pages Posted: 25 Mar 2014 Last revised: 26 Mar 2014

Harry Flam

Stockholm University - Institute for International Economic Studies (IIES); CESifo (Center for Economic Studies and Ifo Institute)

Roine Vestman

Stockholm University - Department of Economics; Swedish House of Finance

Date Written: February 1, 2014

Abstract

Actively managed Swedish equity mutual funds generated an average positive 4-factor alpha of 0.9 per cent per year before expenses and a negative alpha of -0.5 per cent after expenses in 1999-2009. There is practically no persistence in returns. When funds are ranked on past performance, their returns converge to the mean in about two years. There is furthermore practically no evidence of true management skill. The actual 4-factor alphas of most funds before and after expenses, including those with the highest alphas, do not differ significantly from bootstrapped alphas constructed under the null hypothesis that alpha is zero for all funds.

Suggested Citation

Flam, Harry and Vestman, Roine, Swedish Equity Mutual Funds: Performance, Persistence and Presence of Skill (February 1, 2014). Swedish House of Finance Research Paper No. 14-04. Available at SSRN: https://ssrn.com/abstract=2414137 or http://dx.doi.org/10.2139/ssrn.2414137

Harry Flam

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Roine Vestman (Contact Author)

Stockholm University - Department of Economics ( email )

Universitetsvägen 10 A
House A, floor 4 and 7
Frescati, Stockholm
Sweden

HOME PAGE: http://www.ne.su.se/

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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