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- Author(s): STEPHEN J. BROWN, WILLIAM N. GOETZMANN
- Published: Apr 30, 2012
- Pages: 679-698
- DOI: 10.1111/j.1540-6261.1995.tb04800.x
We explore performance persistence in mutual funds using absolute and relative benchmarks. Our sample, largely free of survivorship bias, indicates that relative risk‐adjusted performance of mutual funds persists; however, persistence is mostly due to funds that lag the S&P 500. A probit analysis indicates that poor performance increases the probability of disappearance. A year‐by‐year decomposition of the persistence effect demonstrates that the relative performance pattern depends upon the time period observed, and it is correlated across managers. Consequently, it is due to a common strategy that is not captured by standard stylistic categories or risk adjustment procedures.