A new perspective on performance persistence

evidence using portfolio holdings

Scott Bennett, David R. Gallagher, Graham Harman, Geoffrey J. Warren, Yuki Xi

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

We investigate the existence and sources of performance persistence for Australian equity funds, using monthly portfolio holdings data. We find significant persistence among outperforming rather than underperforming funds, which is primarily related to security selection skill, and is associated with growth-orientated funds. Meanwhile, the relation between persistence and momentum is secondary and nuanced. Further, persistence largely derives from existing holdings, while subsequent active trading contributes only moderately positive returns for both outperforming and underperforming funds. We also find that persistence fades beyond 6 months and vanishes after 24 months. Our findings differ from those for U.S. equity funds and previous Australian studies, implying that persistence may vary with market context and its identification may depend on data availability.

Original languageEnglish
Pages (from-to)91-125
Number of pages35
JournalAccounting and Finance
Volume58
Issue number1
DOIs
Publication statusPublished - Mar 2018

Keywords

  • Active management
  • Performance evaluation
  • Performance persistence
  • Portfolio holdings
  • Trades

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