Mutual Fund Performance

Abstract

The authors examine the variation in performance for a sample of 770 actively managed mutual funds during the 1993–95 period. They find that not only investment style but also style consistency affects the rate of return. Funds that change both their value versus growth and smallversus large-capitalization stock allocation strategies belong to the worst-performing group. Funds that change only their value versus growth or smallversus large-cap stock orientation do no better than styleconsistent funds. In addition, style-consistent funds are not all alike. Growth/large-cap stock funds are the worstperforming style-consistent funds. Growth/small-cap funds have the biggest rate of return but are also the least diversified.

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