Return Persistence, Risk Dynamics and Momentum Exposures of Equity and Bond Mutual Funds

38 Pages Posted: 6 Mar 2007 Last revised: 29 Apr 2008

See all articles by Martin Martens

Martin Martens

Erasmus University Rotterdam (EUR); Robeco Asset Management

Thierry Post

Graduate School of Business of Nazarbayev University

Joop Huij

Erasmus University - Rotterdam School of Management; Robeco; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

Date Written: March 2, 2007

Abstract

To analyze persistence in mutual fund performance, it is common practice to construct portfolios of funds based on past fund returns. Using a large sample of equity and bond funds, we show that this approach introduces dynamic exposures to common stock and bond risk factors. Correcting for risk dynamics substantially reduces the level of persistence in risk-adjusted performance and drives out the explanatory power of stock and bond momentum factors.

Keywords: mutual funds, performance persistence, momentum, time-varying risk exposures

JEL Classification: G11, G14, G19

Suggested Citation

Martens, Martin P.E. and Post, Thierry and Huij, Joop, Return Persistence, Risk Dynamics and Momentum Exposures of Equity and Bond Mutual Funds (March 2, 2007). ERIM Report Series. Available at SSRN: https://ssrn.com/abstract=967720 or http://dx.doi.org/10.2139/ssrn.967720

Martin P.E. Martens

Erasmus University Rotterdam (EUR) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1253 (Phone)
+31 10 408 9162 (Fax)

Robeco Asset Management ( email )

Rotterdam, 3011 AG
Netherlands

Thierry Post

Graduate School of Business of Nazarbayev University ( email )

53 Kabanbay Batyra Avenue
Astana, 010000
Kazakhstan

Joop Huij (Contact Author)

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.rsm.nl/jhuij

Robeco

Rotterdam, 3014DA
Netherlands

HOME PAGE: http://www.robeco.com/

Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

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