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UK mutual funds: performance persistence and portfolio size

Author

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  • Keith Cuthbertson

    (University of London)

  • Dirk Nitzsche

    (University of London)

  • Niall O’Sullivan

    (Cork University Business School, University College Cork)

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.

Suggested Citation

  • Keith Cuthbertson & Dirk Nitzsche & Niall O’Sullivan, 2023. "UK mutual funds: performance persistence and portfolio size," Journal of Asset Management, Palgrave Macmillan, vol. 24(4), pages 284-298, July.
    • Handle: RePEc:pal:assmgt:v:24:y:2023:i:4:d:10.1057_s41260-023-00310-7
    DOI: 10.1057/s41260-023-00310-7
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    More about this item

    Keywords

    Mutual fund performance persistence; Factor models; Portfolio size;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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