The Persistence of Risk-Adjusted Mutual Fund Performance

J. OF BUSINESS, Vol. 69 No. 2, April 1996

Posted: 3 Apr 1996

See all articles by Edwin J. Elton

Edwin J. Elton

New York University (NYU) - Department of Finance

Martin J. Gruber

New York University (NYU) - Department of Finance

Christopher R. Blake

Fordham University - Gabelli School of Business

Multiple version iconThere are 3 versions of this paper

Abstract

We examine predictability for stock mutual funds using risk- adjusted returns. We find that past performance is predictive of future risk-adjusted performance. Applying modern portfolio theory techniques to past data improves selection and allows us to construct a portfolio of funds that significantly outperforms a rule based on past rank alone. In addition, we can form a combination of actively managed portfolios with the same risk as a portfolio of index funds but with higher mean return. The portfolios of funds selected have small but statistically significant positive risk-adjusted returns during a period where mutual funds in general had negative risk-adjusted returns.

JEL Classification: G11

Suggested Citation

Elton, Edwin J. and Gruber, Martin J. and Blake, Christopher R., The Persistence of Risk-Adjusted Mutual Fund Performance. J. OF BUSINESS, Vol. 69 No. 2, April 1996. Available at SSRN: https://ssrn.com/abstract=7329

Edwin J. Elton (Contact Author)

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0361 (Phone)
212-995-4233 (Fax)

Martin J. Gruber

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0333 (Phone)
212-995-4233 (Fax)

Christopher R. Blake

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
Lowenstein Building
New York, NY 10023
United States
212-636-6750 (Phone)

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