Persistence in the returns of equity mutual funds: An empirical analysis in Indian context

Abstract

Performance evaluation of mutual funds has gained significance in the recent past. Various attributes related to the performance of the funds and its influence has also been analysed. Persistence refers to the consistency in the performance of mutual funds. It is the ability of funds to maintain their relative performance over time. Mutual fund schemes that have performed well in the past years and have ability to perform better in future will always be in the limelight. As investors are more interested to pick up the future winners for their portfolio based on the historical performance, there is a need to review the persistence in the performance of the mutual funds over the period of years. This paper examines whether there exists a consistency in the performance of open ended equity diversified mutual fund schemes over a period of 11 years. The main aim of this paper is to investigate whether past performance of mutual funds has any relation with their future performance. For this purpose, simple regression model and contingency analysis methods are employed. The results reveal that, mutual funds which maintained winners position in the past years are able to maintain the same position in the future years depending on the growth of the industry.