Addressing mutual fund performance across investment styles

ABSTRACT

The main objective of this study is to examine fund performance across different investment styles. Using a large sample of US mutual funds, we evaluate fund performance in relation to investment style. Our results show that fund performance differs across categories, with Value and SmallCap funds performing better than Growth and LargeCap funds, respectively. However, we observe notable differences in their performance distribution, since the alphas of Growth and SmallCap funds cover a range of broader intervals. Likewise, the best Growth funds and the best SmallCap funds in each month perform better than their comparable Value and LargeCap peers, respectively. In contrast, the worst Growth and SmallCap funds experience the worst performance during the sample period. These results are not driven by other performance indicators, such as fund size or portfolio expenses.

KEYWORDS:

• Mutual fund
• performance
• Morningstar category
• investment style

JEL CLASSIFICATION:

• G10
• G11
• G23

Acknowledgments

We are grateful to an anonymous referee and the editor for their comments, which have contributed to improving the overall quality of the article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Considering gross alphas in the analysis leads us to very similar results. These results are not reported here, for the sake of brevity, but are available from the authors upon request.

Additional information

Funding

This study is part of the research projects ECO2017-85746-P supported by the Spanish Ministerio de Economía, Industria y Competitividad and UJI-B2017-14 supported by Universitat Jaume I.