Studies appear to exhibit mild evidence that well performing funds exhibit performance __________,but stronger evidence that poor performing funds __________.

A) persistence; improve their performance
B) persistence; continue to perform poorly
C) reversal; improve their performance
D) reversal; continue to perform poorly

Question

Studies appear to exhibit mild evidence that well performing funds exhibit performance __________,but stronger evidence that poor performing funds __________.

A) persistence; improve their performance
B) persistence; continue to perform poorly
C) reversal; improve their performance
D) reversal; continue to perform poorly

Quizplus · Accepted Answer

There is mild evidence that top performing funds exhibit performance persistence,but stronger evidence that poor performing funds continue to perform poorly.The percentage of funds that continue to outperform is small,as is the margin by which they outperform.Given that some funds specialise in style investing,it is not surprising that at some stages of the business cycle some styles do better than others.In effect,particular styles correlate with the business cycle.Hence,at any point in time,it is not surprising that some funds do outperform,and perhaps exhibit superior performance,for a year or two.However,predicting these funds and establishing the link between styles and the business cycle is a difficult task.

Studies Appear to Exhibit Mild Evidence That Well Performing Funds