Investing in mutual funds when returns are predictable

Arbeitspapier

This paper analyzes the performance of portfolio strategies that invest in noload, open-end U.S. domestic equity mutual funds, incorporating predictability in (i) manager skills, (ii) fund risk-loadings, and (iii) benchmark returns. Predictability in manager skills is found to be the dominant source of investment profitability - long-only strategies that incorporate such predictability considerably outperform prior-documented hot-hands and smart-money strategies, and generate positive and significant performance with respect to the Fama-French and momentum benchmarks. Specifically, these strategies outperform their benchmarks by 2-4% per year through their ability to time industries over the business cycle. Moreover, they choose individual funds that outperform their industry benchmarks to achieve an additional 3-6% per year. Overall, our findings indicate that industries are important in locating outperforming mutual funds, and that active management adds much more value than documented by prior studies.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CFR Working Paper ; No. 05-13

Klassifikation und Themen

• Klassifikation: Wirtschaft

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Avramov, Doron ; Wermers, Russ
• Ereignis: Veröffentlichung
• (wer): University of Cologne, Centre for Financial Research (CFR)
• (wo): Cologne
• (wann): 2005

Weitere Informationen

• Handle: http://hdl.handle.net/10419/57727
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ