School of Business publications portal
Aaltodoc publication archive
Aalto University School of Business Master's Theses are now in the Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Accounting and Finance | Finance | 2009
Thesis number: 12046
A study of European mutual funds' performance persistence and predictability of selected factors
Author: Kukkonen, Viktor
Title: A study of European mutual funds' performance persistence and predictability of selected factors
Year: 2009  Language: eng
Department: Department of Accounting and Finance
Academic subject: Finance
Index terms: rahoitus; financing; sijoitusrahastot; investment funds
Pages: 80
Key terms: european mutual funds; performance persistence; mutual fund factors

The objective of this thesis is to analyze the performance persistence of European mutual funds and study, which factors could be used as predictors for future performance. The study concentrates in examining five selected mutual fund factors, which are past raw performance, Sharpe ratio and Jensen alpha as risk-adjusted performance, mutual fund age and mutual fund expenses. Additionally, the predictive ability of quantitative fund rating model is examined.

The study also reviews findings from other scholarly papers considering alternative attributes, which could be used as predictors for future fund performance. These include turnover, fund size, manager’s characteristics, mutual fund flows and financial advisers.


Data on mutual funds and net-asset-values (NAV) are drawn from the Bloomberg’s database. The sample is narrowed to consist of 122 European equity mutual funds and it covers the period of October 1999 to September 2008.


The study identifies strong inferior performance persistence. A significant underperformance is found in the portfolios consisting of past losers; portfolios of past winners show positive abnormal returns, though insignificant. The study finds that no particular mutual fund factor examined show significantly better predictive ability for future superior performance. However, portfolio of winner funds selected according to last year raw performance has generated slightly higher risk-adjusted returns. In this study, it is also found that quantitative fund rating model was the best in predicting future inferior fund performance. Mutual funds with higher expense ratios have outperformed funds with low expense ratios, though the returns are insignificant. Mutual fund age has not found to affect mutual fund performance.
Master's theses are stored at Learning Centre in Otaniemi.