Cross-Sectional Performance Persistence of Mutual Fund Managers

63 Pages Posted: 15 May 2017 Last revised: 25 Mar 2018

Ilhan Demiralp

University of Oklahoma - Division of Finance

Chitru S. Fernando

University of Oklahoma - Michael F. Price College of Business

Date Written: March 21, 2018

Abstract

We examine the cross-sectional performance persistence in mutual funds by comparing the performance of the same manager across multiple contemporaneously-managed funds. We document statistically and economically significant cross-sectional performance persistence across funds managed by the same individual even when fund portfolios are drawn from different objective classes. Nonetheless, 16.1% (7.2%) of the managers in our sample contemporaneously manage a top-40% (20%) fund and a bottom-40% (20%) fund more than 50% of the time. Furthermore, on average, 80% of managers in our sample have at least one underperforming fund in each quarter. However, a small but statistically significant number of managers persistently outperform for up to 8 quarters across all their funds. We provide new evidence on managerial busyness by showing that managers’ performance drops significantly when the number of funds they manage increases, especially when these multiple funds have disparate objectives.

Keywords: Mutual Funds, Mutual Fund Performance, Portfolio Management, Fund Manager Performance, Cross-Sectional Performance, Performance Persistence, Skill versus Luck

JEL Classification: G11, G14, G23

Suggested Citation

Demiralp, Ilhan and Fernando, Chitru S., Cross-Sectional Performance Persistence of Mutual Fund Managers (March 21, 2018). Available at SSRN: https://ssrn.com/abstract=2967895 or http://dx.doi.org/10.2139/ssrn.2967895

Ilhan Demiralp

University of Oklahoma - Division of Finance ( email )

Norman, OK 73019
United States

Chitru S. Fernando (Contact Author)

University of Oklahoma - Michael F. Price College of Business ( email )

Adams Hall
307 West Brooks Street
Norman, OK 73019-4004
United States
405-325-2906 (Phone)
405-325-7688 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/F/Chitru.Fernando-1/

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