Testing for Persistence in Mutual Fund Performance and the Ex Post Verification Problem: Evidence From the Greek Market

Babalos, Vassilios; Caporale, Guglielmo Maria; Kostakis, Alexandros; Philippas, Nikolaos

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Testing for Persistence in Mutual Fund Performance and the Ex Post Verification Problem: Evidence From the Greek Market

European Journal of Finance, Vol. 14, pp. 735-753, 2008

41 Pages Posted: 30 May 2007 Last revised: 15 Mar 2011

See all articles by Vassilios Babalos

Vassilios Babalos

Department of Accounting & Finance, Technological Educational Institute of Peloponnese; University of Piraeus - Department of Banking and Financial Management

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Alexandros Kostakis

University of Liverpool - Management School (ULMS); The University of Manchester - Manchester Business School

Nikolaos Philippas

University of Piraeus - Department of Business Administration

Date Written: March 13, 2011

Abstract

The present study examines a series of performance measures as an attempt to resolve the ex post verification problem. These measures are employed to test the performance persistence hypothesis of domestic equity funds in Greece, during the period 1998-2004. Correctly adjusting for risk factors and documented portfolio strategies explains a significant part of the reported persistence. The intercept of the augmented Carhart regression is proposed as the most appropriate performance measure. Using this measure, weak evidence for persistence, only before 2001, is documented. The growth of the fund industry, the direction of flows to past winners and the integration in the international financial system are suggested to be the reasons for the absence of performance persistence.

Keywords: Mutual funds, Performance persistence, Market efficiency,Emerging markets

JEL Classification: G14, G15, G21, G23

Suggested Citation: Suggested Citation

Babalos, Vassilios and Caporale, Guglielmo Maria and Kostakis, Alexandros and Philippas, Nikolaos, Testing for Persistence in Mutual Fund Performance and the Ex Post Verification Problem: Evidence From the Greek Market (March 13, 2011). European Journal of Finance, Vol. 14, pp. 735-753, 2008, Available at SSRN: https://ssrn.com/abstract=989741