Konstantinos Drakos, N. Giannakopoulos, P. Konstantinou
{"title":"Investigating Persistence in the US Mutual Fund Market: A Mobility Approach","authors":"Konstantinos Drakos, N. Giannakopoulos, P. Konstantinou","doi":"10.15353/rea.v7i1.1485","DOIUrl":null,"url":null,"abstract":"Performance persistence in the US mutual fund market is investigated, modeling risk-adjusted performance as a Markov Chain. This allows us to explore whether there is a higher probability for funds to remain in their initial ranking, compared to the probability that funds exhibit some kind of movement. We find some degree of inertia due to non-uniformity of transition probabilities across states. Our analysis allows also assesses the proximity of empirical transition matrices to two benchmark matrices, identifying the no-persistence/perfect immobility cases. We find that the observed transition matrices are closer to the no-persistence benchmark and also that performance persistence has decreased over time.","PeriodicalId":42350,"journal":{"name":"Review of Economic Analysis","volume":"1 1","pages":""},"PeriodicalIF":0.7000,"publicationDate":"2015-11-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Economic Analysis","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.15353/rea.v7i1.1485","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 1
Abstract
Performance persistence in the US mutual fund market is investigated, modeling risk-adjusted performance as a Markov Chain. This allows us to explore whether there is a higher probability for funds to remain in their initial ranking, compared to the probability that funds exhibit some kind of movement. We find some degree of inertia due to non-uniformity of transition probabilities across states. Our analysis allows also assesses the proximity of empirical transition matrices to two benchmark matrices, identifying the no-persistence/perfect immobility cases. We find that the observed transition matrices are closer to the no-persistence benchmark and also that performance persistence has decreased over time.