A New Perspective on Performance Persistence: Evidence Using Portfolio Holdings

35 Pages Posted: 28 Mar 2018

See all articles by Scott Bennett

Scott Bennett

Russell Investments

David R. Gallagher

Rozetta Institute

Graham Harman

Russell Investments

Geoffrey J. Warren

Centre for International Finance and Regulation (CIFR); Australian National University (ANU)

Yuki Xi

Russell Investments

Multiple version iconThere are 2 versions of this paper

Date Written: March 2018

Abstract

We investigate the existence and sources of performance persistence for Australian equity funds, using monthly portfolio holdings data. We find significant persistence among outperforming rather than underperforming funds, which is primarily related to security selection skill, and is associated with growth‐orientated funds. Meanwhile, the relation between persistence and momentum is secondary and nuanced. Further, persistence largely derives from existing holdings, while subsequent active trading contributes only moderately positive returns for both outperforming and underperforming funds. We also find that persistence fades beyond 6 months and vanishes after 24 months. Our findings differ from those for U.S. equity funds and previous Australian studies, implying that persistence may vary with market context and its identification may depend on data availability.

Keywords: Performance persistence, Performance evaluation, Active management, Portfolio holdings, Trades

Suggested Citation

Bennett, Scott and Gallagher, David R. and Harman, Graham and Warren, Geoffrey J. and Xi, Yuki, A New Perspective on Performance Persistence: Evidence Using Portfolio Holdings (March 2018). Accounting & Finance, Vol. 58, Issue 1, pp. 91-125, 2018. Available at SSRN: https://ssrn.com/abstract=3151114 or http://dx.doi.org/10.1111/acfi.12212

Scott Bennett (Contact Author)

Russell Investments ( email )

King Street
Sydney, WA NSW 2000
Australia

David R. Gallagher

Rozetta Institute ( email )

Sydney

Graham Harman

Russell Investments ( email )

909 A Street
Tacoma, WA 98402
United States

Geoffrey J. Warren

Centre for International Finance and Regulation (CIFR)

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Australian National University (ANU)

Canberra, Australian Capital Territory 2601
Australia

Yuki Xi

Russell Investments

909 A Street
Tacoma, WA 98402
United States

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