Abstract
We investigate persistence in the relative performance of 3549 bond mutual funds from 1990 to 2003. We show that bond funds that display strong (weak) performance over a past period continue to do so in future periods. The out-of-sample difference in risk-adjusted return between the top and bottom decile of funds ranked on past alpha exceeds 3.5 percent per year. We demonstrate that a strategy based on past fund returns earns an economically and statistically significant abnormal return, suggesting that bond fund investors can exploit the observed persistence. Our results are robust to a wide range of model specifications and bootstrapped test statistics.
Original language | English |
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Pages (from-to) | 559-572 |
Number of pages | 14 |
Journal | Journal of Banking & Finance |
Volume | 32 |
Issue number | 4 |
DOIs | |
Publication status | Published - 1 Jan 2008 |