Year: 1990
Type: report
Abstract: The net returns of no-load mutual gro'Mh funds exhibit a hot-hands phenomenon during 1974-87.When performance is measured byJensen'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 timingcomponent -knowing when to pick which fund -is sigeificant.These results are robust to alternative equity portfolio benchmarks, such as those that account for firm-size effects and mean reversion in returns.Capiti'ing on the hot hands phenomenon, an investor could have generated a significant, risk-adjusted excess return of 10% per year.
DOI: 10.3386/w3389
Institutions: National Bureau of Economic Research, Harvard University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2081047516