Performance persistence in European equity funds

Abstract

Using a sample of European equity funds, in this paper we analyse if performance persistence exists for a period from 2002 to 2013. Data are obtained from Inverco’s database. Portfolio analysis is used to test for performance persistence. I find strong evidence of performance persistence using semester returns: winner funds (funds with the best returns in one semester) show better returns in the next semester than losers (funds that had the worst returns in the previous period). A robustness analysis is done in order to test for persistence in one and two year. The results are very similar; performance persistence exists in our sample. The main limitation is the variability of funds during the years and the impossibility to know which funds disappear or merged and became a new one