Is the rating given to a European mutual fund a good indicator of its future performance?

Vincent Fromentin () and Christine Louargant ()
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Christine Louargant: CEREFIGE - University of Lorraine

Economics Bulletin, 2014, vol. 34, issue 2, 1235-1246

Abstract: The objective of this paper is to investigate whether the rating of a fund is a determinant of its future performance. This study focuses on the Fundclass ratings for a sample of 1,452 EU funds with a similar style of management for the period 2003–12 (a period marked by economic crisis). By using the methodology of non-stationary panel data, we simultaneously assess the long- and short-term relationship between fund performance and scoring, using a vector error correction model. Our results conclude that there is a positive relationship between these two variables over time. Nevertheless, in the short term, this relationship is only valid for the period 2007–12, especially for funds with a good rating.

Keywords: rating; performance; investment funds; panel data; cointegration; vector models (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2014-06-18
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Working Paper: Is the Rating Given to a European Mutual Fund a Good Indicator of Its Future Performance? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-14-00283

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