English, Article, Journal or magazine article edition: Hot Hands in Mutual Funds: The Persistence of Performance, 1974-87 Darryll Hendricks; Jayendu Patel; Richard Zeckhauser

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Bookmark: http://trove.nla.gov.au/version/167314
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Hot Hands in Mutual Funds: The Persistence of Performance, 1974-87
Author
  • Darryll Hendricks
  • Jayendu Patel
  • Richard Zeckhauser
Physical Description
  • preprint
Notes
  • The net returns of no-load mutual growth funds exhibit a hot-hands phenomenon during 1974-87. When performance is measured by Jensen's alpha, mutual funds that perform well in a one year evaluation period continue to generate superior performance in the following year. Underperformers also display short-run persistence. Hot hands persists in 1988 and 1989. The success of the hot hands strategy does not derive from selecting superior funds over the sample period. The timing component -- knowing when to pick which fund -- is significant. These results are robust to alternative equity portfolio benchmarks, such as those that account for firm-size effects and mean reversion in returns. Capitiling on the hot hands phenomenon, an investor could have generated a significant, risk-adjusted excess return of 10% per year.
  • RePEc:nbr:nberwo:3389
Language
  • English
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