Investigating Persistence in the US Mutual Fund Market: A Mobility Approach

Konstantinos Drakos, Nicholas Giannakopoulos () and Panagiotis Theodore Konstantinou
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Panagiotis Theodore Konstantinou: Athens University of Economics and Business, Greece

Review of Economic Analysis, 2015, vol. 7, issue 1, 54-83

Abstract: Performance persistence in the US mutual fund market is investigated, modeling risk-adjusted performance as a Markov Chain. This allows us to explore whether there is a higher probability for funds to remain in their initial ranking, compared to the probability that funds exhibit some kind of movement. We find some degree of inertia due to non-uniformity of transition probabilities across states. Our analysis allows also assesses the proximity of empirical transition matrices to two benchmark matrices, identifying the no-persistence/perfect immobility cases. We find that the observed transition matrices are closer to the no-persistence benchmark and also that performance persistence has decreased over time.

Keywords: Markov Chain; Mobility; Mutual Funds; Persistence (search for similar items in EconPapers)
JEL-codes: G14 G23 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ren:journl:v:7:y:2015:i:1:p:54-83

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