Posted: 4 May 2000
We explore performance persistence in mutual funds using absolute and relative benchmarks. Our sample, largely free of survivorship bias, indicates that relative risk-adjusted performance of mutual funds persists, however persistence is mostly due to funds that lag the S&P 500. A profit analysis indicates that poor performance increases the probability of disappearance. A year-by-year decomposition of the persistence effect demonstrates that the relative performance pattern depends upon the time period observed, and it is correlated across managers. Consequently, it is due to a common strategy that is not captured by standard stylistic categories, or risk adjustment procedures.
JEL Classification: G14
Suggested Citation: Suggested Citation
Brown, Stephen J. and Goetzmann, William N., Performance Persistence. JOURNAL OF FINANCE, Vol 50 No 2, June 1995. Available at SSRN: https://ssrn.com/abstract=6174