The persistence of risk-adjusted mutual fund performance

Article Abstract:

The predictability for stock mutual funds is examined using risk-adjusted returns. Results re-confirm the hot hands result that high return can forecast high return in the short run. However, when funds are ranked using risk-adjusted returns, prior performance is found to be a good determinant of future risk-adjusted performance in both the short run and longer run. Moreover, when modern portfolio theory (MPT) methods are applied to distribute capital among funds, a portfolio of funds that shows better performance than a rule based on past rank alone and that generates a positive risk-adjusted excess return can be developed based on past data. The MPT techniques also assist in developing a combination of actively managed portfolios having the same risk as a portfolio of index funds and greater mean return. The portfolios have small but significant positive risk-adjusted returns when mutual funds had negative risk-adjusted returns.

Forecasts and trends, Mutual funds, Stock funds

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Professionally managed, publicly traded commodity funds

Article Abstract:

Increased investor interest in commodity funds has not been accompanied by increased research as to the rate of return for such funds or their comparative performance relative to other stock and bond investment vehicles. An initial comprehensive research into commodity funds' performance indicates that: commodity funds are not as profitable as other investment alternatives; commodity funds are not an appropriate diversification investment technique for bond or stock portfolios; and future commodity fund performance is apparently not predictable from an analysis of past performance results. Two possible reasons for these findings are identified: (1) the large transaction costs involved when investing in commodity funds, and (2) the emphasis of commodity fund investments on technical analysis.

Security and commodity exchanges, Models, Investments, Return on investment, Commodities, Rate of return, Ratio analysis, Commodity funds

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