We investigate persistence in the relative performance of 3,549 bond mutual funds from 1990 to 2003. We show that bond funds that display strong (weak) performance over a past period continue to do so in future periods. The out-of-sample difference in risk-adjusted return between the top and...

Using monthly return data of more than 6400 US equity mutual funds we investigate short-run performance persistence over the period 1984-2003. We sort funds into rank portfolios based on past performance, and evaluate the portfolios' out-of-sample performance. To cope with short ranking periods,...

In this note we revisit the 2011 and 2013 papers of Blitz, Huij, and Martens (BHM2011), and Blitz, Huij, Lansdorp, and Verbeek (BHLV2013) in which momentum and reversal strategies on residual returns are proposed. Our results indicate that the main findings of these studies, that residual...

Mutual funds following factor investing strategies based on equity asset pricing anomalies, such as the small cap, value, and momentum effects, earn significantly higher alphas than traditional actively managed mutual funds. A buy-and-hold strategy for a random factor fund yields 110 basis...

Abnormal price reaction around S&P 500 index changes has been considered as strong evidence that long term demand for stocks is downward sloping. This notion, however, has recently lost popularity due to the evidence that new additions are accompanied with a contemporaneous change in future...

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...

High (low) quality stocks generate anomalously high (low) returns above and beyond expected returns based on betas, market sizes, valuations, and momentum. We provide a comprehensive overview of commonly used quality definitions and test their predictive power for stock returns. We show that...

Various studies recommend investing in factor premiums beyond the classic market risk premium, such as the small-cap, value, momentum, and low-volatility premiums. It is unclear, however, if factor investing can best be implemented using a long-only or a long-short approach. We empirically...

We document persistence in the performance of emerging market equity funds and find some notable differences compared to US 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 small...

Hedge funds are fundamentally exposed to equity volatility, skewness, and kurtosis risks based on the systematic pattern and significant spread in alphas from the existing models that do not control for the higher-moment risks. The spread and pattern in alphas do not disappear with bootstrap...