UK mutual funds: performance persistence and portfolio size

Keith Cuthbertson, Dirk Nitzsche and Niall O’Sullivan ()
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Keith Cuthbertson: University of London
Dirk Nitzsche: University of London
Niall O’Sullivan: Cork University Business School, University College Cork

Journal of Asset Management, 2023, vol. 24, issue 4, No 4, 284-298

Abstract: Abstract We re-examine performance persistence amongst UK mutual funds. Specifically, we investigate performance persistence amongst small portfolios of past high-performing funds. In contrast to the more common analysis of decile portfolios of funds, we focus 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. We investigate fund persistence based on practitioner index models as well as academic factor models, focusing on small portfolios of funds using inference based on nonparametric persistence test statistics as well as conventional t tests. We 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. We also document some sensitivity in inferences on positive persistence when using nonparametric versus conventional tests.

Keywords: Mutual fund performance persistence; Factor models; Portfolio size (search for similar items in EconPapers)
JEL-codes: C15 G11 G12 G14 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1057/s41260-023-00310-7

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