Parametric and Non-Parametric Analysis of Performance Persistence in Spanish Investment Funds

This paper describes a financial study of performance persistence in a set of Spanish investment funds targeting short-term fixed-income securities. In view of the nature of the funds and market considered, it is therefore a completely new study. The data base is free of survivorship bias.Moreover, given the nature of the portfolios considered, performance is analysed using a novel index that is based on Sharpe's original but provides consistent rankings for the whole sample employed in the study.The performance persistence phenomenon is analysed over a dual time horizon (half yearly and annual) using two methodologies. The first of these is a non-parametric (contingency tables) methodology in which the statistical tests of Malkiel (1995), Brown and Goetzmann (1995), and Kahn and Rudd (1995) are applied to establish the robustness of the phenomenon studied, while the second is parametric (regression analysis). This joint analysis enables us to consider the effects of changes in the methodology and time horizon on the results obtained.We can confirm that the phenomenon of persistence is present to a significant degree in the data base used in the study. Consequently, historical fund performance data provides a basis for investment strategies that would yield higher returns than could be achieved in the absence of the persistence phenomenon. Our research also shows that the availability of a greater volume of historical information does not necessarily imply any increase in the level of persistence