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The performance of mutual funds on French stock market:Do star funds' managers exist or do funds have to hire chimpanzees?

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MPRA_paper_46892.pdf (512Kb)
Date
2013
Publisher city
Munich
Publisher
University Library of Munich
Collection title
MPRA Paper
Collection Id
46896
Dewey
Economie financière
Sujet
Mutual funds performances; overperformance; fund managers skills
JEL code
G.G1.G11
URI
https://basepub.dauphine.fr/handle/123456789/12058
Collections
  • LEDa : Publications
Metadata
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Author
Bernard, Philippe
status unknown
Blanchard, Michel
status unknown
Type
Document de travail / Working paper
Item number of pages
18
Abstract (EN)
We test here the kahneman (kahneman 2011) results about fund managers: that is, do managers are really skilled or could any chimpanzee do the job? Moreover, the recent stormy period should enlighten us about the interest to invest in mutual funds: do they over perform the market? Do they smooth the losses? Do they have well managed the alternative bearish and bullish periods of the markets? Few recent studies focus on the French Stock market. In this paper, we investigate the performance, persistence and behavior of mutual funds only investing in the Paris stock exchange market from 2000 to 2012. We find that funds clearly over-perform the market on average but only on a 60 months investment horizon. Average annual excess is close to zero (+0.3%) for funds which were active over all the period. Yet, some have salient good (bad) relative performances. The challenge is then to distinguish skill from luck since funds can have extreme returns by luck. Our approach is to test for persistence in fund returns, that is, whether past winners continue to produce high returns and losers continue to underperform. Then, we apply the Carhart 1997 4-factors model, in order to evaluate the weight of the systematic drivers of the performance.

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