Investigating the Performance and Performance Consistency of Iranian Mutual Funds Using CAPM& CARHART’s Four- Factor Models; A Comparative Approach

Abstract

This study seeks to investigate the performance as well as the performance consistency of Iranian mutual funds during the current and subsequent periods. To this end, the Capital Asset Pricing Model along with CARHART’s four-factor model have been utilized to analyze the performance and performance consistency of investment funds. In order to examine persistency, all models are divided into 10 portfolios (10 distributions) based on the performance of the past one year. Then we considered succeeding 12 months later. Our results revealed that mutual funds in Iran have not outperformed the market, but there is performance consistency. This means mutual funds with the best performance (worst performance) will perform the same (better or worse) in the upcoming years. However, the extent of the best and worst performance of mutual funds is not significantly different. The historical performance of mutual funds can, to some extent, explain future performance. Therefore, investors' reliance on the backgrounds of investment funds as a recourse for investment is well justified. In other words, if investors spend on mutual funds with a past outperformance, there is a reasonable assurance to be repeated the past and will be among the winning funds in future periods. The opposite is also true

Keywords

• mutual funds performance
• active management
• panel data
• consistency