Using a sample free of survivor bias, I demonstrate that common factors in stock
returns and investment expenses almost completely explain persistence in equity
mutual funds' mean and risk-adjusted returns. Hendricks, Patel and Zeckhauser's
(1993) "hot hands" result is mostly driven by the one-year momentum effect of
Jegadeesh and Titman (1993), but individual funds do not earn higher returns from
following the momentum strategy in stocks. The only significant persistence not
explained is concentrated in strong underperformance by the worst-return mutual
funds, The results do not support the existence of skilled or informed mutual fund
portfolio managers.
%0 Journal Article
%1 carhart1997persistence
%A Carhart, Mark M.
%D 1997
%J The Journal of Finance
%K factor-investing momentum
%N 1
%P 57-82
%R https://doi.org/10.1111/j.1540-6261.1997.tb03808.x
%T On Persistence in Mutual Fund Performance
%V 52
%X Using a sample free of survivor bias, I demonstrate that common factors in stock
returns and investment expenses almost completely explain persistence in equity
mutual funds' mean and risk-adjusted returns. Hendricks, Patel and Zeckhauser's
(1993) "hot hands" result is mostly driven by the one-year momentum effect of
Jegadeesh and Titman (1993), but individual funds do not earn higher returns from
following the momentum strategy in stocks. The only significant persistence not
explained is concentrated in strong underperformance by the worst-return mutual
funds, The results do not support the existence of skilled or informed mutual fund
portfolio managers.
@article{carhart1997persistence,
abstract = {Using a sample free of survivor bias, I demonstrate that common factors in stock
returns and investment expenses almost completely explain persistence in equity
mutual funds' mean and risk-adjusted returns. Hendricks, Patel and Zeckhauser's
(1993) "hot hands" result is mostly driven by the one-year momentum effect of
Jegadeesh and Titman (1993), but individual funds do not earn higher returns from
following the momentum strategy in stocks. The only significant persistence not
explained is concentrated in strong underperformance by the worst-return mutual
funds, The results do not support the existence of skilled or informed mutual fund
portfolio managers.},
added-at = {2019-04-29T15:45:03.000+0200},
author = {Carhart, Mark M.},
biburl = {https://www.bibsonomy.org/bibtex/28dd1e5b9a65716e828199c9ef7edd538/antoinefalck},
doi = {https://doi.org/10.1111/j.1540-6261.1997.tb03808.x},
interhash = {7b0513bbf0c7e051812ae1f3a470ef69},
intrahash = {8dd1e5b9a65716e828199c9ef7edd538},
journal = {The Journal of Finance},
keywords = {factor-investing momentum},
month = {March},
number = 1,
pages = {57-82},
timestamp = {2019-04-29T15:45:03.000+0200},
title = {On Persistence in Mutual Fund Performance},
volume = 52,
year = 1997
}