We investigate the existence of capacity effects on the winner fund level for US equity mutual funds between 1992 and 2007. Conditioning on fund size yields positive yet insignificant four-factor alphas for small winner funds. Small winner funds with low inflows generate significantly positive...

This paper investigates the reasons for the lack of long-term persistence in the investment performance of actively managed equity mutual funds. We document that the responses of investors, fund managers, and investment management companies to past performance have an important impact on future...