Selecting Australian Equity Superannuation Funds: A Retail Investor's Perspective

32 Pages Posted: 20 Jun 2002

See all articles by Michael E. Drew

Michael E. Drew

Griffith University

Jon D. Stanford

University of Queensland - School of Economics

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Abstract

In this performance persistence study, two questions are addressed. First, what is the relationship between past fund returns and future performance? Second, does a 'hot hand' fund selection system deliver economically significant returns to investors? Using a sample of Australian equity superannuation funds over the 1990s, the answers from this study are as follows: On a raw and risk-adjusted return basis we find evidence of mean reversion, with prior annual performance having little influence on future fund return. Selecting funds based on a persistence strategy resulted in under-performance of industry and passive returns for the retail superannuation investor over the sample period. Our findings have serious implications for financial planning advisors who market superannuation funds based on past performance. Our results suggest that previous annual performance has little influence on future returns.

Keywords: Superannuation funds, Australia, Performance persistence, Past performance

JEL Classification: G230, G150

Suggested Citation

Drew, Michael E. and Stanford, Jon D. and Veeraraghavan, Madhu, Selecting Australian Equity Superannuation Funds: A Retail Investor's Perspective. Available at SSRN: https://ssrn.com/abstract=314886 or http://dx.doi.org/10.2139/ssrn.314886

Michael E. Drew

Griffith University ( email )

Brisbane, Queensland 4111
Australia

Jon D. Stanford

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia

Madhu Veeraraghavan (Contact Author)

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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