Trades of the Living Dead: Style Differences, Style Persistence and Performance of Currency Fund Managers

Momtchil Pojarliev and Richard M. Levich

No 14355, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We make use of a new database on daily currency fund manager returns over a three-year period, 2005-08. This higher frequency data allows us to estimate both alpha measures of performance and beta style factors on a yearly basis, which in turn allows us to test for persistence. We find no evidence to support alpha persistence; a manager's alpha in one year is not significantly related to his alpha in the prior year. On the other hand, there is substantial evidence for style persistence; funds that rely on carry, trend or value trading or with a long/short bias toward currency volatility are likely to maintain that style in the following year. In addition, we are able to examine the performance of managers that survive through the entire sample period, versus those that drop out. We find significant differences in both the investment styles of living versus deceased funds, as well as their realized alpha performance measures. We conjecture that both style differences and ineffective market timing, rather than market conditions, have impacted performance outcomes and induced some managers to close their funds.

JEL-codes: F31 G11 G15 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-mst
Note: IFM
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Citations: View citations in EconPapers (7)

Published as Pojarliev, Momtchil & Levich, Richard M., 2010. "Trades of the living dead: Style differences, style persistence and performance of currency fund managers," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1752-1775, December.

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