Several studies report that abnormal returns associated with short-term reversal investment strategies diminish once transaction costs are taken into account. We show that the impact of transaction costs on the strategies' profitability can largely be attributed to excessively trading in small...

We document persistence in the performance of emerging market equity funds and find several notable differences compared to US equity funds. First, the contribution of winner funds to the return spread between winner and losers is substantially larger for emerging market funds. Second, only a...

In this study we use a comprehensive database of mutual funds and study performance persistence across different styles, regions, and asset classes. While we find strong evidence of performance persistence for some markets, there is weak or no evidence for other markets. Contrary to popular...

Using a sample of domestic U.S. equity mutual funds, we find strong evidence that investors respond to managerial replacements. We find that the top performing funds that have a change in management subsequently have lower flows compared to funds of which the manager is retained. On top of that,...

Conventional short-term reversal strategies exhibit dynamic exposures to the Fama and French (1993) factors. We develop a novel reversal strategy based on residual stock returns that does not exhibit these exposures and consequently earns risk-adjusted returns that are twice as large as those of...

In this study we evaluate the performance of actively managed equity mutual funds against a set of passively managed index funds. We find that the return spread between the best performing actively managed funds and a factor-mimicking portfolio of passive funds is positive and as large as 3 to 5...

European index funds and exchange-traded funds underperform their benchmarks by 50 to 150 basis points per annum. The explanatory power of dividend withholding taxes as a determinant of this underperformance is at least at par with fund expenses. Dividend taxes also explain performance...

REITs exhibit a strong and prevalent momentum effect that is not captured by conventional factor models. This REIT momentum anomaly hampers proper judgments about the performance of actively managed REIT portfolios. In contrast, a REIT momentum factor adds incremental explanatory power to...

To analyze persistence in mutual fund performance, it is common practice to construct portfolios of funds based on past fund returns. Using a large sample of equity and bond funds, we show that this approach introduces dynamic exposures to common stock and bond risk factors. Correcting for risk...

We show that multifactor performance estimates for mutual funds suffer from systematic biases, and argue that these biases are a result of miscalculating the factor premiums. Because the factor proxies are based on hypothetical stock portfolios and do not incorporate transaction costs, trade...