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The Persistence of Risk-Adjusted Mutual Fund Performance

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  • Elton, Edwin J
  • Gruber, Martin J
  • Blake, Christopher R

Abstract

The authors examine predictability for stock mutual funds using risk-adjusted returns. They find that past performance is predictive of future risk-adjusted performance. Applying modern portfolio theory techniques to past data improves selection and allows the authors to construct a portfolio of funds that significantly outperforms a rule based on past rank alone. In addition, they can form a combination of actively managed portfolios with the same risk as a portfolio of index funds but with higher mean return. The portfolios selected have small but statistically significant positive risk-adjusted returns during a period where mutual funds in general had negative risk-adjusted returns. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • Elton, Edwin J & Gruber, Martin J & Blake, Christopher R, 1996. "The Persistence of Risk-Adjusted Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 69(2), pages 133-157, April.
    • Handle: RePEc:ucp:jnlbus:v:69:y:1996:i:2:p:133-57
    DOI: 10.1086/209685
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