New Zealand mutual funds: measuring performance and persistence in performance

Authors


  • We would like to thank two anonymous referees and the editor of Accounting and Finance, David Gallagher, Imtiaz Mazumder and participants at the 17th Australasian Banking and Finance Conference, Sydney, 2004, the 9th meeting of the New Zealand Finance Colloquium, Wellington, 2005, for their helpful comments. Aaron Gilbert's assistance in the collection of the dataset is acknowledged. Any remaining errors are the sole responsibility of the authors. The views expressed in the present paper are not necessarily shared by ABP Investments.

Abstract

The present study investigates the performance of New Zealand mutual funds using a survivorship-bias controlled sample of 143 funds for the period of 1990–2003. Our overall results suggest that New Zealand mutual funds have not been able to provide out-performance. Alphas for equity funds, both domestic and international, are insignificantly different from zero, whereas balanced funds underperform significantly. There is no evidence of timing abilities by the fund managers. In the short term, significant evidence of return persistence for all funds is observed. This persistence, however, is driven by ‘icy hands’ rather than ‘hot hands’. Finally, we find the risk-adjusted performance for equity funds to be positively related to fund size and expense ratio and negatively related to load charges.

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