CAN WINNERS KEEP WINNING? AN ANALYSIS OF PERFORMANCE PERSISTENCE OF MUTUAL FUNDS AND HEDGE FUNDS IN CHINA

This paper investigates the performance persistence of both mutual funds and hedge funds using China's data covering the period from January 2010 to December 2019. We first use a nonparametric method to examine the performance persistence with net return and Sharpe ratio over monthly, quarterly, semiannual, and annual intervals. We first find evidence that performance persistence exists in some years for both mutual funds and hedge funds. Then we construct portfolios based on lagged one-year returns and estimate their performance. We find top-performing portfolios of hedge funds that can get significantly positive alpha while no portfolio of mutual funds can get positive alpha.