Prediction of Future Performance of Mutual Funds on the Basis of Past Performance
Abstract
During the past decades, Indian mutual fund industry has reached new heights and witnessed major revolution in terms of number of players and total assets under management. With the plethora of schemes available in the Indian market, an investor before making any investment decision, consider the past performance of these mutual fund schemes. Thus, this paper analyses and presents the empirical evidence with regard to the performance persistence of mutual fund schemes and examines whether their past performance provides useful information for predicting the future performance. For this purpose, a sample of 44 mutual funds schemes has been analysed for a period of eight years from April’ 2005 to March’ 2013. For the analysis, various parametric and non-parametric techniques as Brown and Goetzmann’s Odds Ratio (OR), Kahn and Rudd’s χ2-test and regression analysis have been used. Results confirm the presence of performance persistence in mutual funds.
Keywords: Mutual funds, Performance Persistence, Non Parametric Techniques, Parametric Techniques.
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