Hot Hands in Mutual Funds: Short-Run Persistence of Relative Performance, 1974-1988

Darryll Hendricks, Jayendu Patel and Richard Zeckhauser

Journal of Finance, 1993, vol. 48, issue 1, 93-130

Abstract: The relative performance of no-load, growth-oriented mutual funds persists in the near term, with the strongest evidence for a one-year evaluation horizon. Portfolios of recent poor performers do significantly worse than standard benchmarks; those of recent top performers do better, though not significantly so. The difference in risk-adjusted performance between the top and bottom octile portfoli os is six to eight percent per year. These results are not attributable to known anomalies or survivorship bias. Investigations with a differen t (previously used) data set and with some post-1988 data confirm the finding of persistence. Copyright 1993 by American Finance Association.

Date: 1993
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