UK mutual funds: performance persistence and portfolio size
Study conjectures that there may be stronger positive persistence in small-size portfolios relative to the more commonly studied larger decile portfolios.
The paper UK mutual funds:performance persistence and portfolio size re-examines performance persistence amongst UK mutual funds. Specifically, the authors of the study investigate performance persistence amongst small portfolios of past high-performing funds. In contrast to the more common analysis of decile portfolios of funds, the focus here is on persistence in the more extreme positive tail of the cross section of fund performance.
This paper contributes to the smaller literature on UK rather than US mutual fund performance. It investigates fund persistence based on practitioner index models as well as academic factor models, focusing on small portfolios of funds using inference based on non-parametric persistence test statistics as well as conventional t tests.
The authors provide strong evidence of positive persistence amongst small-size portfolios of (past) high-performing funds that is robust to alternative formation and holding periods and alternative performance models. They also document some sensitivity in inferences on positive persistence when using non-parametric versus conventional tests.
The published version of UK mutual funds:performance persistence and portfolio size is available for download at City Research Online. It is published in Journal of Asset Management.
