Cross-Sectional Performance Persistence of Mutual Fund Managers
63 Pages Posted: 15 May 2017 Last revised: 25 Mar 2018
Date Written: March 21, 2018
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: Suggested Citation