Swedish Equity Funds: A Study of Performance and Return Persistence

Sammanfattning: Previous research has shown that equity funds tend to not over perform in relation to the market index regardless of the fund’s investment strategy. However, academic opinions are ambiguous regarding whether equity funds exhibit persistence in performance and if equity funds’ performance can be explained by market timing ability.This study examines the performance of 99 Swedish equity funds investing domestically during the time period of 1993-2008. We have studied the risk adjusted performance of these funds and if they show signs of performance persistence in their returns using different lengths of sub periods. Furthermore, using the methodology of Treynor and Mazuy we have studied if over performance can be attributed to stock-picking and/or market timing. The study finds that actively managed Swedish equity funds do not tend to over perform to any great extent. However when isolating small-cap funds, the risk adjusted performance is higher. Regarding performance persistence, we find statistically significant results for certain time periods but persistence using 24 months sub periods is especially strong. With regards to market timing and stock-picking we cannot find evidence of any positive market timing ability within our fund sample.