Description
Many studies have discussed mutual funds
performance, especially about the persistence of
excess returns. Regression is the most common
method to be used to research the fund
persistence. Dutta (2002) proposes a simpler
approach –a direct annual examination of
whether a fund beats a market proxy or not, to
research the persistence in American mutual
fund returns. In this study, authors use a similar
methodology to analyse New Zealand growth
mutual funds. In addition, a statistically robust
method is juxtaposed as a comparison. The
study finds that the most of the funds sampled
during the period 1996-2003 are unable to better
the benchmark of the world index.
Accounting Research Journal
Persistence in Mutual Fund Returns: New Zealand Evidence
Keith Hooper Howard Davey Roger Su Dani A.C. Foo
Article information:
To cite this document:
Keith Hooper Howard Davey Roger Su Dani A.C. Foo, (2006),"Persistence in Mutual Fund
Returns: New Zealand Evidence", Accounting Research J ournal, Vol. 19 Iss 2 pp. 105 - 121
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Athanasios G. Noulas, J ohn A. Papanastasiou, J ohn Lazaridis, (2005),"Performance
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Persistence in Mutual Fund Returns: New Zealand Evidence
105
Persistence in Mutual Fund Returns:
New Zealand Evidence
Keith Hooper
Faculty of Business
Auckland University of Technology
Howard Davey
Waikato Management School
The University of Waikato
Roger Su
Equity Investment Advisers and Sharebrokers Limited
and
Dani A.C. Foo
Waikato Management School
The University of Waikato
Abstract
Many studies have discussed mutual funds
performance, especially about the persistence of
excess returns. Regression is the most common
method to be used to research the fund
persistence. Dutta (2002) proposes a simpler
approach –a direct annual examination of
whether a fund beats a market proxy or not, to
research the persistence in American mutual
fund returns. In this study, authors use a similar
methodology to analyse New Zealand growth
mutual funds. In addition, a statistically robust
method is juxtaposed as a comparison. The
study finds that the most of the funds sampled
during the period 1996-2003 are unable to better
the benchmark of the world index.
1. Introduction
There have been many debates about mutual
fund performance – especially about the
persistence of excess returns. The debate can be
divided into two parts: on one hand, those like
Carhart (1997) point out that mutual funds
excess performance does not persist, except in
the very short term; and, on the other hand,
those like Gruber (1996) and Elton, Gruber and
Blake (1996), who argue that excess
performance does persist and that past
performance can be a predictor of future
performance.
Dutta (2002) states that the prior researchers,
who test performance of samples of mutual
funds will typically concentrate on common
stock mutual funds. Research on persistence in
excess performance has examined samples of
mutual funds in various ways. Among the many
studies on performance of mutual funds, most
of studies control for differences in objectives
by including appropriate control variables in the
regression analysis. And, the tests are made
more robust by using conditional performance
evaluating and including net cash flow on a
sector-wide basis (Ferson and Warther (1996),
Gruber (1996) and Tiwari and Vijh (2001)).
Malkiel (1995) maintains that since
persistence of excess returns can only be tested
with a sample that includes funds that have
existed in both the base and the following
period, the sample characteristics must
necessarily be influenced by survivorship. Dutta
(2002) proposes a comparable but simpler
approach – a direct annual examination of
whether a fund beats a market proxy or not.
The simpler method is used in this study.
The excess performance and the persistence of
mutual fund performance is determined by
whether a fund outperforms or underperforms a
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
106
chosen market benchmark on an annual basis.
In this study, firms in the sample have their
stated investment objective as New Zealand
growth mutual funds market benchmark from
1996 to 2003. In addition, a statistically robust
method is juxtaposed as a comparison.
Drawing on New Zealand data, this paper
contributes its findings to the arguments as to
the most correct method to be employed.
Initially, the method of a direct annual
examination as to whether a fund beats the
chosen market proxy (or not) has also been
replicated in this paper. Morgan Stanley Capital
World Index (MSCI) is appointed as the
benchmark. The sample is examined over the
period 1996-2003. Participants in the sample
chosen are New Zealand growth mutual funds.
Further, this paper attempts to find evidence
of persistence independent of and apart from
using any benchmarks such as MSCI or the
Morgan Stanley New Zealand Index (MSNZI).
That is, attempting to extract from a selected
subset of the given dataset, statistically robust
evidence of persistence (if any). The paper
commences with a visual exploration of the
performance of the dataset, comparing selected
funds with the performance of the MSCI and
the MSNZI. Then, the paper replicates the
method used by Dutta (2002), by using the
same methodology against the same kind of
data. By way of comparison and corroboration,
the well known Spearman-Rank method, is used
to find any persistence information embedded in
the dataset.
The paper is organized into the following
sections: first, previous studies of performance
persistence; second, section three presents the
data and methodology; and the following
sections analyse the results of the study.
2. Previous Studies of Performance
Persistence
The paper complements Vos et al. (1995) by
examining an updated sample. Apart from
updating the work of Vos et al. (1995) the target
of this study is focused specifically on 42 New
Zealand fund performances, compared to 12
Australian and 14 New Zealand funds. Vos et
al. point out that investors want from active
managers the ability to obtain above average
results, while being diversified enough to avoid
the risk of sudden failure due to the swift
demise of major elements in the portfolio.
However, to achieve such success, based on
superior timing or superior portfolio selection,
would be a contradiction of the Efficient Market
Hypothesis. Some managers may achieve for a
time impressive returns but only within the
bounds of statistical probability. Thus, there is
always a probability that someone will achieve
above the market but there is no guarantee that
past returns will predict future performance –
any more than a coin that is tossed twice to
yield “heads” will achieve “heads” a third time.
Why does not past performance provide a basis
for future prediction? Troutman (1991) suggests
that different phases of the market suit different
fund managers, whose portfolio characteristics
may lean to certain sectors or to dividend yields
or growth stocks. As firms grow, there are
inevitable personnel changes and skills may be
transferred elsewhere.
As Vos et al. (1995) explain, studies on the
persistence of mutual fund performance have
been inconclusive. Beebower and Bergstrom
(1977) found evidence of some persistence for
risk adjusted returns, while Klemkosly (1977)
and Dunn and Theisen (1983) found a lack of
persistence. By contrast, more recently Grinblatt
and Titman (1992), Hendricks et al. (1993),
Goetzman and Ibbotson (1994) found evidence
of persistence. More importantly, Vos et al.
(1995) findings based on Australian and New
Zealand equity trusts found a lack of
persistence.
2.1 Short term persistence
On the other hand, Carhart (1997) argues that
the performance of mutual funds does persist
but only in the short term. His argument
supports the results of Hendricks et al. (1993) of
a short-term persistence in stock returns.
Carhart also finds persistence in poor
performance by the lowest decile of fund
performers.
Agarwal and Naik (2000) find only a
maximum persistence at a quarterly horizon
indicating that persistence among hedge fund is
of a short-term nature. They also point out that
there is no evidence of persistence using yearly
returns under the multi-period framework.
Casarin (2002) finds from a multi-periods
persistence analysis: (i) absence of long-run
excess persistence on total returns and on risk
adjusted returns; (ii) evidence of a “hot-hand”
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Persistence in Mutual Fund Returns: New Zealand Evidence
107
(positive performance always followed by
positive performance, winning following by
winning) effect on risk adjusted returns for four-
month intervals (short run persistence).
Dutta (2002), points out that in years when
the market benchmark (with S&P500 as the
benchmark) yields a high return, the losers
(underperformers) in that year seem more likely
to repeat their poor performance the following
year. Also, winners are less likely to repeat their
performance in years following high market
returns. In his paper, Dutta (2002) chooses a
sample over the period 1988 to 1996. Firms in
the sample have their stated investment
objective as growth equity. The author also
claims that persistence in positive performance
outweighs persistence in negative performance.
With regard to all the previous studies, most
of them use regression analysis to determine
performance and performance persistence and
generally report conflicting findings. Malkiel
(1995) argues that the persistence of mutual
funds can only be tested with a sample that
includes funds that have existed in both the base
and the following periods that is the sample
characteristics must necessarily be influenced
by survivorship. In the paper of Dutta (2002),
the performance and the persistence of mutual
fund performance is determined by whether a
fund outperforms or underperforms a chosen
market benchmark (S&P500) on an annual
basis.
3. Data and Methodology
The data used in the study are returns on all
available New Zealand growth mutual funds
from Fund Source (Fund Source is one of the
two main research houses in New Zealand, the
other one is Morningstar) over the period
November 1996 to November 2003. Three
growth mutual fund sections are chosen:
Diversified Growth Unit Trust and
Growth/Income Funds; Diversified Growth
Superannuation Funds; and, Diversified Growth
Insurance Bonds. The details of funds are
available in Table 1A, Table 1B and Table 1C.
The sample consists of 42 mutual funds over the
seven-year study. There were 25 funds
marketed in 1996, with the number growing
gradually to 42 in 2002. During the seven-year
period, none of the initial funds dropped out of
the data-set.
The Morgan Stanley Capital International
World Index (MSCI) simple annual return is
appointed as the benchmark, not S&P500 that
was used in many prior studies. In the allocation
of New Zealand growth mutual funds,
international equity gets a heavy weight
allocation – about 50% or more. A possible
reason for such a high allocation might be New
Zealand’s low market capitalization relative to
total funds under management, perhaps
exacerbated by compulsory superannuation.
Table 1A
Diversified growth unit trustand Gif’s performance %
96-97 97-98 98-99 99-00 00-01 01-02 02-03
AMP Dynamic trust 8.39 11.86 13.15 4.36 -7.88 -17.83 2.97
ANZ Long term growth fund -11.83 2.87
BT NZ - Managed growth 6.48 9.84 7.46 -1.46 -9.09 4.19
Fisher Funds Fledgling Fund -1.97 -6.04 4.2
Public Trust Capital Growth fund 7.12 7.98 9.45 2.7 -1.93 -6.04 3.94
Public Trust Growth Priority Fund 6.2 11.63 2.53 -2.58 -7.52 4.11
SBS Growth Fund 2.5 1.27 -8.27 3.68
Thoroughbred Growth Trust 4.76 7.95 11.47 5.81 -7.19 -12.57 5.21
Westpac Growth Trust 6.61 8.51 9.43 4.87 -6.45 -16.37 1.72
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
108
Table 1B
Diversified Growth Superannuation Fund Performance %
1997 1998 1999 2000 2001 2002 2003
AMP Pers Super performance 6.52 7.77 15.05 3.3 -9.33 -14.91 8.19
AMP PRP Dynamic 6.82 11.55 12.8 4.83 -7.72 -17.28 3.03
ANZ Retirement Plan Growth 6.58 6.74 7.97 4.85 -2 -6.38 3.79
ASB Easyplan Growth 16.2 6.21 -9.09 -12.96 4
Asteron Retirement Plus aggressive 18.38 21.12 4.1 -8.37 -4.84 14.69
Asteron RSP Mgd Growth 7.24 8.93 8.7 4.38 -2.53 -5.52 6.78
Asteron SP2000 Dynamic 7 4.54 8.95 2.47 -2.26 -6.61 5.97
Asteron Superplan Aggressive -3 -4.43 14.89
Asteron Superplan Dynamic 6.31 4.07 8.45 1.84 -3.23 -7.78 5.3
AXA Goldline Invest-Aggressive 6.02 2.71 8.44 4.62 -5.39 -10.03 5.04
AXA Goldline Super-Aggressive 6.02 2.71 8.45 4.61 -5.39 -10.03 5.05
BNZ Future Lifestyle-Dynamic Growth 11.1 13.27 4.88 -3.84 -11.46 2.22
BT Ltp Mgd Growth Fund 5.94 5.22 10.11 7.18 -1.56 -9.34 4.89
Colomial Masterpac-Dynamic Growth 10.07 16.51 6.38 -11.61 -14.27 2.33
Colonial Masterpac-mgd Growth 9.3 7.18 6.09 2.3 -7.99 2.4
Colonial vision Entrepreneurial 6.84 3.42 9.61 6.77 -3.17 -8.85 2.37
Sovereign Super High Growth fund 6.06 7.86 15.89 5.71 -3.78 -9.55 3.73
Sovereign Super Max Growth 7.38 5.34 22.46 4.73 -5.08 -11.9 3.38
Thoroughbred Growth Flexible 12.64 18.15 3.98 -9.5 -9.83 4.1
Thoroughbred Growth Locked-in 11.85 16 3.95 -9.22 -9.63 4.17
Tower Freedomplan Growth fund 8.87 9.38 7.28 4.16 -5.45 -12.18 5.11
Tower Futureplan Growth Fund 8.87 9.38 7.28 4.16 -5.45 -12.18 5.11
Tower IP Growth Fund -5.45 -12.18 5.11
Westpac Retire Plan Dynamic Fund 6.64 8.28 8.19 7.21 -8.54 -15.34 1.64
Table 1C
Diversified Growth Ins.Bonds Performance %
1997 1998 1999 2000 2001 2002 2003
AMP Dynamic Bond 8.32 12.49 21.23 4.42 -7.77 -17.79 3.09
ANZ Ascent Growth Fund -12.54 10.83
Asteron Lifeplan/Go Kidz Dynamic 6.31 4.07 17.01 1.84 -3.23 -7.78 3.62
Asteron Saverguard plus Aggressive 18.38 12.89 4.1 -8.37 -4.84 14.69
Asteron Wise Aggressive 22.86 9.5 4.78 -10.5 -5.61 14.05
AXA Zenith Mgd Portfolio 5.21 2.46 21.12 4.83 -5.44 -10.49 5.01
Colonial Stag Fund 3.65 6.05 21.51 6.59 -3.3 -8.86 2.18
Sovereign High Growth Fund 7.02 6.01 8.45 5.29 -3.77 -9.13 3.35
Sovereign Max Growth 5.34 5.8 7.5 5.65 -5.88 -11.93 4.52
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Persistence in Mutual Fund Returns: New Zealand Evidence
109
The S&P500 index comprises 500 shares in
USA, which does not represent the global
equity market. Thus, for many reasons, MSCI is
the most appropriate benchmark to be chosen in
the study. The performance of MSCI is shown
in Table 2 and Chart 1.
4. Preliminary Data Analysis
The returns of New Zealand growth mutual
funds are based on their annual performance.
Each return is calculated with fund prices from
November to November each year. To be
meaningful there needs to be a temporally
contiguous set of data of adequate length of
time. A dataset of 25 Funds is chosen for this
purpose as shown as Table 2. The year 1996
was deemed to be the base year upon which a
performance index for each of the funds is
respectively calculated. This anchor provides a
standard and an intuitively appealing
comparison between the performance of the
various funds and the chosen market indices,
viz, the MSCI and MSNZI. This provides a
common starting point.
Table 2
Performance of 25 funds, indexed on 1996
Funds\Years 1996 1997 1998 1999 2000 2001 2002 2003
AMP Dynamic Trust 100 108.39 121.25 137.19 143.17 131.89 108.37 111.59
Public Trust Capital Growth Fund 100 107.12 115.67 126.6 130.02 127.51 119.81 124.53
Thoroughbred Growth Trust 100 104.76 113.09 126.06 133.38 123.79 108.23 113.87
Westpac Growth Trust 100 106.61 115.68 126.59 132.76 124.19 103.86 105.65
AMP Pers Super Performance 100 106.52 114.8 132.07 136.43 123.7 105.26 113.88
AMP PRP Dynamic 100 106.82 119.16 134.41 140.9 130.02 107.56 110.82
ANZ Retirement Plan Growth 100 106.58 113.76 122.83 128.79 126.21 118.16 122.64
Asteron RSP Mgd Growth 100 107.24 116.82 126.98 132.54 129.19 122.06 130.33
Asteron SP2000 Dynamic 100 107 111.86 121.87 124.88 122.06 113.99 120.79
Asteron Superplan Dynamic 100 106.31 110.64 119.99 122.19 118.25 109.05 114.83
AXA Goldline Invest-Aggressive 100 106.02 108.89 118.08 123.54 116.88 105.16 110.46
AXA Goldline Super-Aggressive 100 106.02 108.89 118.09 123.54 116.88 105.16 110.47
BT Ltp Mgd Growth Fund 100 105.94 111.47 122.74 131.55 129.5 117.4 123.15
Colonial Vision Entrepreneurial 100 106.84 110.49 121.11 129.31 125.21 114.13 116.84
Soverign Super High Growth Fund 100 106.06 114.4 132.57 140.14 134.85 121.97 126.52
Soverign Super Max Growth Fund 100 107.38 113.11 138.52 145.07 137.7 121.32 125.42
Tower Freedomplan Growth Fund 100 108.87 119.08 127.75 133.07 125.81 110.49 116.14
Tower Futureplan Growth Fund 100 108.87 119.08 127.75 133.07 125.81 110.49 116.14
Westpac Retire Plan Dynamic Fund 100 106.64 115.47 124.93 133.93 122.5 103.71 105.41
AMP Dynamic Bond 100 108.32 121.85 147.72 154.25 142.26 116.95 120.57
Asteron Lifeplan/Go Kidz Dynamic 100 106.31 110.64 129.46 131.84 127.58 117.65 121.91
AXA Zenith Mgd Portfolio 100 105.21 107.8 130.57 136.87 129.43 115.85 121.65
Colonial Stag Fund 100 103.65 109.92 133.56 142.37 137.67 125.47 128.21
Sovereign High Growth Fund 100 107.02 113.45 123.04 129.55 124.66 113.28 117.08
Sovereign Max Growth Fund 100 105.34 111.45 119.81 126.58 119.13 104.92 109.66
Index based 1996 for MSNZI 100 114.022 74.951 85.477 73.534 71.218 77.585 86.312
Index based 1996 for MSCI 100 112.9 133.79 160.41 146.68 121.67 101.63 117.43
1 Year NZ Deposits
Raw 5.22 4.97 4.29 4.75 3.88 3.96 3.7
Indexed 100 105.22 110.45 115.19 120.66 125.34 130.31 135.13
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
110
These series are plotted in conjunction with
two benchmarks to gauge the relative
performance of the respective funds against the
two benchmarks. The performance for these
two indices is detailed at the bottom of Table 2.
By plotting these benchmarks together the
following chart (Chart 1) is obtained. From the
Chart, it appears that the selected funds
consistently outperform the MSNZI apart from
the initial year. The performance with regard to
the MSCI (World Index) is somewhat more
mixed. These raise issues of needing to choose
the right benchmark to gauge persistence and
whether the definition of persistence relative to
a benchmark is appropriate. However, it does
show, at least in the years studied, that the funds
have performed better than those investors who
rely solely on domestic equity.
The commentary is more telling when these
are juxtaposed with the cumulative returns
(refer to bottom of Table 2 – “1 Year NZ
Deposits) elicited from the Risk Free rate (ten
year Government Bond rate) for each of the
corresponding years.
Charts (2 and 3) below plot the risk free rate
against all the funds and market indices. It
appears that in the end, despite the active
interventions by fund managers, passive
investment at a risk free rate appeared to have
been the better of the two strategies for the
periods under consideration. However to be fair,
both the MSNZI and MSCI also
underperformed the risk free, passive
investment returns, especially in the later stages
of the period considered, as shown in the Chart
(3) below.
5. Dutta’s (2002) Methodology
To determine the performance following Dutta
(2002), a fund is designated as a winner in a
year it outperforms the market, and as a loser if
it underperforms the benchmark MSCI.
Table 3 presents the annual return and
standard deviation statistics for the sample, as
well as the number of New Zealand growth
mutual funds with data available in each year
since November 1996 to November 2003. As
Table 3 shows, there was steady growth in the
number of funds with return data available.
Among the total 42 funds, 25 are initial funds
that existed in 1996; the other 17 funds were
established between 1997 and 2003. Since the
funds were established, none of them dropped
out during the seven year period.
Chart 1
Comparison of the Indexed Performance:
MSCI, MSNZI and various Funds
1996
1997
1998
1999
2000
2001
2002
2003
60
80
100
120
140
160
1996 1997 1998 1999 2000 2001 2002 2003
MSCI is denoted by (1). MSNZI by (2)
Index
Value
(1)
(2)
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Persistence in Mutual Fund Returns: New Zealand Evidence
111
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
1996 1997 1998 1999 2000 2001 2002 2003
(1) Risk Free
Index Value
(1)
Chart 2
"Risk Free" against all Funds
Chart 3
Risk Free Performance against the Benchmarks
WI
(1)
(3)
(2)
60.0
80.0
100.0
120.0
140.0
160.0
1996 1997 1998 1999 2000 2001 2002 2003
Year
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WI NZ RF
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
112
Table 3
Annual Statistics of Growth Funds: Nov.1996- Nov.2003
Year Mean % Std. Dev. % N
1996-97 6.64 1.21 25
1997-98 8.51 4.59 35
1998-99 12.51 4.81 36
1999-00 4.69 1.47 37
2000-01 -5.11 3.19 40
2001-02 -10.24 3.63 42
2002-03 5.18 3.52 42
Given above are the annual mean returns and standard deviations for a sample of 42 New
Zealand growth mutual funds during 1996 to 2003.
Table 4
Annual Statistics for funds based on comparison with MSCI World Index
Year Under-performance Over-performance
Mean Std Dev N Mean Std Dev N
1997 6.64 1.21 25
1998 8.1 3.91 34 22.8 1
1999 11.12 3.39 31 21.49 0.56 5
2000 4.69 1.47 37
2001 -5.11 3.19 40
2002 -17.6 0.31 3 -9.66 3.09 39
2003 5.18 3.52 42
Given above are statistics for the sample of New Zealand growth mutual funds, based on whether the
fund managed to beat the simple annual MSCI Index return.
Table 4 examines performance and compares
the mean annual return between the two sub-
samples designated as under-performers and
out-performers. The MSCI world index is
chosen as the benchmark comparison. During
the seven year period, only in three years did
both underperforming and outperforming funds
exist in 1998, 1999 and 2002. In 1997 and 2003,
all the funds were underperforming; while all
funds beat the market MSCI index in 2000 and
2001.
Compared with prior studies, New Zealand
growth mutual funds appear to present a unique
phenomenon: when world index (MSCI)
performed well (positive return), all or most of
funds underperformed in 1997, 1998, 1999 and
2003; conversely, when MSCI benchmark
showed a negative return in 2000, 2001 and
2002, 92% to 100% of the New Zealand funds
outperformed the benchmark. The difference
between group performances is 14.7% (1998),
10.37% (1999) and 7.94% (2002). In the three
years, the difference in mean returns between
these two groups is significant, not only
statistically but also from casual observation.
Table 5 presents a view of one-year
persistence in terms of under-performance and
out-performance from 1996 to 2003. In the
seven-year period, the percentage of repeat
winners and losers are very similar. In the initial
year 1997, all the 25 funds underperformed the
MSCI. In the following year 1998 and in the
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final year 2003, all of the losers were losers
from the previous year. In 1999, 85% losers
were losers in previous year. In 2000-2001, out-
performing funds were the same winners from
previous years; while there was no under-
performer from previous years. In 2000 and
2001, all the winners continued to out-perform
as they had done in the previous year. In 2002,
most of the winners (97%) were winners from
2001; the remaining 3% were new to market.
However, in 1998, 1999 and 2003, none of
the winners repeated their winning performance
from previous years. During 2000 to 2002, none
of the losers is a loser from a previous year.
Thus, Table 5 demonstrates that neither winners
nor losers continue beating or underperforming
the benchmark during the study period.
The other finding from Table 5 is that, when
the global market performs well, for example
1998, 1999 and 2003, New Zealand growth
mutual funds persist with a high percentage of
losers. In the three high performing years,
MSCI gets individual returns of 18.5%, 19.9%
and 15.55%. While from 2000 to 2002, the
world capital market continues to exhibit
negative returns: –8.56%, -17.05% and –
16.47%, none of the losers repeat their
performance from previous years. These results
support Dutta (2002) that in the year when
market benchmark earns a high return, the
losers in that year seem more likely to repeat
their poor performance in the following years;
also the winners are less likely to repeat their
winning performance in years following high
market returns.
The difference between our findings and
those of previous studies is that Dutta (2002)
and this study is that Dutta (2002) and Malkiel
(1995) both believe that “hot hands” (winning
following by winning) occur much often than
“cold hands” (losing followed by losing) and
persistence in positive performance outweighs
persistence in negative performance. This
research finds that “hot hands” performance has
similar percentage to “cold hands” performance
during the study period.
In this study, neither winner nor loser
continues repeating their performance during
the seven year study period. In other words, the
result of the study supports Hendricks et al.
(1993), Carhart (1997) and Agarwal and Naik
(2000) that the performance of New Zealand
mutual funds does not indicate strong evidence
for excess persistence of performance, there
only is short-term persistence in stock returns.
The results may be explained as follows:
nearly all the losers in really good years are not
likely to repeat their losing performance; and the
winners in really poor years are not likely to
continue their winning performance. There is no
evidence to suggest that the persistence of New
Zealand growth mutual funds performance lasts
longer than two consecutive terms during the
study period. There appears to be a similar
spread of persistence of winners and persistence
of losers.
Table 6 divides the sample into two sub-
samples based on survivorship. Table 6A
presents statistics for the 25 growth mutual funds
that existed for the entire seven years of the
study period, while Table 6 B presents’ similar
statistics for the other 17 funds that have
between one year and six years of data available.
Table 5
Persistence of Fund Performance: Nov. 1996 – Nov.2003
Year Repeat Percent Repeat
Winner Loser Winner Loser Winner Loser
1996-97 25
1997-98 1 34 25 100%
1998-99 5 31 29 85%
1999-00 37 5 100%
2000-01 40 37 100%
2001-02 39 3 38 3 97%
2002-03 42 3 100%
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Table 6A
New Zealand growth mutual funds with return data for each year,
1996–2003
Year Mean Std Dev. Min Max
1997 6.63 1.21 3.65 8.87
1998 6.84 2.87 2.46 12.49
1999 11.99 5.03 7.28 22.46
2000 4.68 1.47 1.84 7.21
2001 -4.94 2.25 -9.33 -1.56
2002 -11.06 3.75 -17.83 -5.52
2003 4.19 1.56 1.64 8.19
Table 6B
New Zealand Growth mutual fund without return data for each year,
1996–2003
Year Mean Std. Dev. Min Max
1997 0 0 0 0
1998 12.72 5.48 6.2 22.86
1999 13.84 4.17 7.18 21.12
2000 4.74 1.53 2.5 7.46
2001 -5.42 4.42 -11.61 2.3
2002 -9.02 3.16 -14.27 -4.43
2003 6.62 4.93 2.22 14.89
The difference of means between the two
groups is not highly significant in the years
from 1998 to 2003, with the lowest being –
0.48% (2001) to the highest being 5.08%
(1998). This differs from the reports by Dutta
(2002) and Malkiel (1995). The funds in Table
6B have higher returns than funds in Table 6A,
except for 2001. Malkiel (1995) states that
funds that underperformed frequently were
unlikely to survive; hence the surviving firms
would show biased performance, as well as
persistence. Dutta (2002) supports Malkiel
(1995), with the assumption that the later
entrants in the growth fund category as a group
seem to have significantly underperformed the
survivor group.
In the study period, the number of growth
mutual funds increased steadily (Table 3). Since
each fund was settled, none of them dropped
out of the sample. In Table 6B, none of the 17
non-surviving funds were in existence in 1996.
Even though the 25 initial funds survived during
the entire seven years and of those 17 funds
have higher returns in five of six years. Thus,
survivorship bias may not help to explain New
Zealand growth mutual funds performance
during 1996 to 2003.
Even though most of New Zealand mutual
funds have about 50% or more allocation on
international equity market, their returns are far
from matching the Morgan Stanley Capital
International Index returns during the study
period. Grinblatt and Titman (1992),
Goetzmann and Ibbotson (1994) and Hendricks
et al. (1993) present strong evidence that mutual
funds that achieve above average returns
continue to enjoy superior performance. They
prefer to use average returns rather than other
indices to examine fund performance. To
examine the above finding, Table 7 includes all
the 25 initial funds that existed during the seven
year study period; the average return is shown
on the bottom row.
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Among the 25 funds, not one has been either
underperforming or outperforming the average
return from 1996 to 2003. None of the funds
dropped out, though they did not continue to
beat the average return during the seven years.
Dutta (2002) found that 2.15% of initial
funds had managed to achieve winning
performance during his study period. In this
study, none of the 25 initial mutual funds
continued their winning streak or losing streak
during 1996 to2003 compared with either MSCI
or average return. So the percentage of those
funds which repeatedly won or lost each year
during the study period is zero. This result is
less than expected assuming that mutual fund
performance is a random occurrence. Achieving
a six year winning or losing streak has a 1.56%
probability, while a seven year winning or
losing streak has 0.78% probability. (Assuming
P is the probability that a winner fund continues
to be a winner fund in the next period, nobody
can expect the fund will persist or not, so P is
expected to be1/2 - a 50/50 probability outcome
is equally likely. If prior year’s results have no
influence on current year performance, for each
fund either winning or losing is equally likely
for each of seven years in the study period. For
P(29) - the probability of 29-year random
continuous winner or loser is less than 0.01%.
Table 7
All 25 Funds that existed during the seven year study period
96–97 97–98 98–99 99–00 2000–01 01–02 02–03
AMP Dynamic trust 8.39 11.86 13.15 4.36 -7.88 -17.83 2.97
Public Trust Capital Growth fund 7.12 7.98 9.45 2.7 -1.93 -6.04 3.94
Thoroughbred Growth Trust 4.76 7.95 11.47 5.81 -7.19 -12.57 5.21
Westpac Growth Trust 6.61 8.51 9.43 4.87 -6.45 -16.37 1.72
AMP Pers Super performance 6.52 7.77 15.05 3.3 -9.33 -14.91 8.19
AMP PRP Dynamic 6.82 11.55 12.8 4.83 -7.72 -17.28 3.03
ANZ Retirement Plan Growth 6.58 6.74 7.97 4.85 -2 -6.38 3.79
Asteron RSP Mgd Growth 7.24 8.93 8.7 4.38 -2.53 -5.52 6.78
Asteron SP2000 Dynamic 7 4.54 8.95 2.47 -2.26 -6.61 5.97
Asteron Superplan Dynamic 6.31 4.07 8.45 1.84 -3.23 -7.78 5.3
AXA Goldline Invest-Aggressive 6.02 2.71 8.44 4.62 -5.39 -10.03 5.04
AXA Goldline Super-Aggressive 6.02 2.71 8.45 4.61 -5.39 -10.03 5.05
BT Ltp Mgd Growth Fund 5.94 5.22 10.11 7.18 -1.56 -9.34 4.89
Colonial vision Entrepreneurial 6.84 3.42 9.61 6.77 -3.17 -8.85 2.37
Sovereign Super High Growth fund 6.06 7.86 15.89 5.71 -3.78 -9.55 3.73
Sovereign Super Max Growth 7.38 5.34 22.46 4.73 -5.08 -11.9 3.38
Tower Freedomplan Growth fund 8.87 9.38 7.28 4.16 -5.45 -12.18 5.11
Tower Futureplan Growth Fund 8.87 9.38 7.28 4.16 -5.45 -12.18 5.11
Westpac Retire Plan Dynamic Fund 6.64 8.28 8.19 7.21 -8.54 -15.34 1.64
AMP Dynamic Bond 8.32 12.49 21.23 4.42 -7.77 -17.79 3.09
Asteron Lifeplan/Go Kidz Dynamic 6.31 4.07 17.01 1.84 -3.23 -7.78 3.62
AXA Zenith Mgd Portfolio 5.21 2.46 21.12 4.83 -5.44 -10.49 5.01
Colonial Stag Fund 3.65 6.05 21.51 6.59 -3.3 -8.86 2.18
Sovereign High Growth Fund 7.02 6.01 8.45 5.29 -3.77 -9.13 3.35
Sovereign Max Growth 5.34 5.8 7.5 5.65 -5.88 -11.93 4.52
Average 6.63 6.84 11.99 4.68 -4.94 -11.06 4.19
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Funds\Years 1997 1998 1999 2000 2001 2002 2003
AMP Dynamic Trust 3.0 2.0 8.0 18.0 23.0 25.0 21.0
Public Trust Capital Growth Fund 7.0 9.0 13.0 22.0 2.0 2.0 13.0
Thoroughbred Growth Trust 24.0 10.0 10.0 5.0 20.0 19.0 5.0
Westpac Growth Trust 13.0 7.0 14.0 9.0 19.0 22.0 24.0
AMP Pers Super Performance 15.0 12.0 7.0 21.0 25.0 20.0 1.0
AMP PRP Dynamic 11.0 3.0 9.0 11.5 21.0 23.0 20.0
ANZ Retirement Plan Growth 14.0 13.0 22.0 10.0 3.0 3.0 14.0
Asteron RSP Mgd Growth 6.0 6.0 16.0 17.0 5.0 1.0 2.0
Asteron SP2000 Dynamic 9.0 19.0 15.0 23.0 4.0 4.0 3.0
Asteron Superplan Dynamic 16.5 20.5 18.0 24.5 7.5 5.5 4.0
AXA Goldline Invest-Aggressive 19.5 23.5 20.0 14.0 13.5 12.5 9.0
AXA Goldline Super-Aggressive 19.5 23.5 18.0 15.0 13.5 12.5 8.0
BT Ltp Mgd Growth Fund 21.0 18.0 11.0 2.0 1.0 10.0 11.0
Colonial Vision Entrepreneurial 10.0 22.0 12.0 3.0 6.0 7.0 22.0
Soverign Super High Growth Fund 18.0 11.0 6.0 6.0 11.0 11.0 15.0
Soverign Super Max Growth Fund 5.0 17.0 1.0 13.0 12.0 15.0 17.0
Tower Freedomplan Growth Fund 1.5 4.5 24.5 19.5 16.5 17.5 6.5
Tower Futureplan Growth Fund 1.5 4.5 24.5 19.5 16.5 17.5 6.5
Westpac Retire Plan Dynamic Fund 12.0 8.0 21.0 1.0 24.0 21.0 25.0
AMP Dynamic Bond 4.0 1.0 3.0 16.0 22.0 24.0 19.0
Asteron Lifeplan/Go Kidz Dynamic 16.5 20.5 5.0 24.5 7.5 5.5 16.0
AXA Zenith Mgd Portfolio 23.0 25.0 4.0 11.5 15.0 14.0 10.0
Colonial Stag Fund 25.0 14.0 2.0 4.0 9.0 8.0 23.0
Sovereign High Growth Fund 8.0 15.0 18.0 8.0 10.0 9.0 18.0
Sovereign Max Growth Fund 22.0 16.0 23.0 7.0 18.0 16.0 12.0
6. Using Non-Parametric Test for
Existence of “Persistence”
In an attempt to eliminate the subjectivity from
the method of direct examination used, we have
chosen, the Spearman Rank Non-parametric
Method (SRM) to elicit the existence of
persistence. Along with the objectivity, SRM
has the added advantage of not having to rely on
an external benchmark such as the MSCI World
Index. This avoids the issues of, first, debating
whether the benchmark is an appropriate
surrogate and, second, whether the manifested
persistence is an artifact of the choice of
benchmark. The persistence, if in existence, is
generated purely by information existing within
the data-set, without reference to or the need for
any external benchmark.
6.1 Methodology
6.1.1 Choice of a Data Subset.
To be meaningful, in SRM, the chosen Funds
must exist for the duration of the period being
studied. In this case, 25 of the 42 chosen funds
existed for the whole duration of 1997 through
2003.
The Data Subset of ranked raw
1
returns is
given in Table 8, where 1 is ranked the highest,
25 is ranked lowest and non-integers are results
of tied ranking.
6.1.2 Ranking of Raw Data (Non-Risk
Adjusted)
Each yearly column of returns in Table 9
shows returns converted into ranks of returns of
1 “Raw” here means “not risk adjusted”
Table 8
Spearman Ranked Raw Returns
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Table 9
Pair-wise ranked differences for each Fund of two consecutive years
Square of Differences of Ranks 97–98 98–99 99–00 00–01 01–02 02–03
AMP Dynamic Trust 1.0 36.0 100.0 25.0 4.0 16.0
Public Trust Capital Growth Fund 4.0 16.0 81.0 400.0 0.0 121.0
Thoroughbred Growth Trust 196.0 0.0 25.0 225.0 1.0 196.0
Westpac Growth Trust 36.0 49.0 25.0 100.0 9.0 4.0
AMP Pers Super Performance 9.0 25.0 196.0 16.0 25.0 361.0
AMP PRP Dynamic 64.0 36.0 6.3 90.3 4.0 9.0
ANZ Retirement Plan Growth 1.0 81.0 144.0 49.0 0.0 121.0
Asteron RSP Mgd Growth 0.0 100.0 1.0 144.0 16.0 1.0
Asteron SP2000 Dynamic 100.0 16.0 64.0 361.0 0.0 1.0
Asteron Superplan Dynamic 16.0 6.3 42.3 289.0 4.0 2.3
AXA Goldline Invest-Aggressive 16.0 12.3 36.0 0.3 1.0 12.3
AXA Goldline Super-Aggressive 16.0 30.3 9.0 2.3 1.0 20.3
BT Ltp Mgd Growth Fund 9.0 49.0 81.0 1.0 81.0 1.0
Colonial Vision Entrepreneurial 144.0 100.0 81.0 9.0 1.0 225.0
Soverign Super High Growth Fund 49.0 25.0 0.0 25.0 0.0 16.0
Soverign Super Max Growth Fund 144.0 256.0 144.0 1.0 9.0 4.0
Tower Freedomplan Growth Fund 9.0 400.0 25.0 9.0 1.0 121.0
Tower Futureplan Growth Fund 9.0 400.0 25.0 9.0 1.0 121.0
Westpac Retire Plan Dynamic Fund 16.0 169.0 400.0 529.0 9.0 16.0
AMP Dynamic Bond 9.0 4.0 169.0 36.0 4.0 25.0
Asteron Lifeplan/Go Kidz Dynamic 16.0 240.3 380.3 289.0 4.0 110.3
AXA Zenith Mgd Portfolio 4.0 441.0 56.3 12.3 1.0 16.0
Colonial Stag Fund 121.0 144.0 4.0 25.0 1.0 225.0
Sovereign High Growth Fund 49.0 9.0 100.0 4.0 1.0 81.0
Sovereign Max Growth Fund 36.0 49.0 256.0 121.0 4.0 16.0
Sum 1074.0 2694.0 2451.0 2772.0 182.0 1842.0
Spearman’s Rank Correlation R
2
0.6 0.0 0.1 -0.1 0.9 0.3
decreasing order (i.e. the higher returns are
ranked higher). Then, in a pair-wise manner, the
differences of the ranks for each Fund of two
consecutive years are derived. As some of these
will result in negative signs, SRM dictates that
these pair-wise differences be squared. Hence
we have Table 9 after the data subset is
transformed.
Each column is summed and the Spearman
Rank formula:
R
2
= 1 – (6 ?d
2
/(n3 – n))
where d = pair-wise difference between ranks of
returns of consecutive years n = number of
funds in the data-subset.
The Spearman’s R
2
figures are given in the
bottom row of the Table 9 above. According to
SRM the closer R
2
is to +1 or -1, the stronger
the likely correlation between the two related
years. A perfect positive correlation is +1 and a
perfect negative correlation is -1.
From the results above, the correlations
between years 1997-98 (column 1) and years
2001-02 are 0.6 and 0.9 respectively. These are
considered to be strong. The rest of the pair-
wise relationships were weak or non-existent.
To further gauge the significance of the two
strong correlations we need to refer to the
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Spearman Rank Significance Table.
2
For this
we need to find the degrees of freedom which is
the number of pairs per column minus 2
(i.e. n-2). In this case we have n=25 hence n-2 =
23. The degrees of freedom equal 23. The
periods (1997-98) and (2001-02) are significant
with p-values of 0.01 (or 99% level). For the
given the data-set it appears that strong
persistence was manifested for the funds from
the years 1997 to 1998 and 2001 to 2002; and
moderate (90% level) persistence was
manifested for the funds in 2002 to 2003.
6.2 Ranking of Risk Adjusted Data
Risk adjustment in this context means taking the
volatility of the data series into account when
the data set is ranked. Here, the (ex-post facto)
standard deviation of each of the Funds is
calculated and used as the surrogate of risk.
Risk adjustment in this case means getting the
quotient of the yearly returns and the volatility
of the same data series. This measure is roughly
akin to the Sharpe Ratio.
It provides a reasonably objective measure of
risk adjustment (i.e. returns per unit of
volatility) and provides an acceptable
approximation for risk adjustment. Further, the
use of the risk free rate (per Sharpe Ratio) is not
considered to be meaningful in this case.
3
Table 10 below has the same type of returns-
ranks for the same Funds previously but
adjusted for risk.
Persistence is observed in Table 11 for the
same time periods albeit at lower statistical
significance. Partially reproducing the Pearson
R Table here at around 23 degrees of freedom
we have the following:
Df = n -2
df \Level of Significance
(p) for Two-Tailed Test
0.1 0.05 0.02 0.01
23 0.337 0.396 0.462 0.505
For years 1997-98 and 2001-02 we appear to
have short-term persistence that is significant
at 95% and 99% levels of significance,
2 Since the sample size is 25, for technical reasons, the
Pearson R table is consulted instead of the Spearman
Rank.
3 Preliminary data analysis showed that most of the funds
under-performed the chosen “risk free” surrogate.
Further, here we are interested only on whether Funds
show “persistence.”
respectively. This means that when a fund first
attains a high ranking it will most likely to be
highly ranked for the following year as well, but
this persistence does not normally last more
than that duration. There does not seem to be
any significant anti-persistence, that is, when a
firm first attains high ranking it is unlikely to
swing to a relatively low ranking in the
following year. Conversely, relatively low
ranking Funds are not likely to suddenly
achieve high ranking in the following year.
The implication for potential investors in
Funds appears to be that they look for Funds
that do well suddenly and bet on these for the
short term. Further they should probably avoid
the long odds by avoiding Funds that have not
performed well currently. The assumption here
is that the Funds allow one to exit and enter
easily and that the transaction costs are
negligible.
7. Conclusion
Many earlier studies had been undertaken to
analyse the persistence of mutual funds
performance; and much debate has ensued due
to conflicting results. However, most studies of
persistence share a methodology which controls
for difference by including appropriate control
variables in the regression analysis. Also, these
tests are made more robust by using conditional
performance evaluation (Ferson and
Warther,1996 and Gruber, 1996).
Malkiel (1995) suggests that survivorship
bias may help to explain the persistence of
mutual fund performance. Dutta (2002) adopts a
simpler and direct methodology to examine the
persistence of mutual fund performance. This
study examines the returns on a sample of New
Zealand growth mutual funds over the period
1996-2003 with the same methodology as Dutta
(2002). The sample is examined on an annual
basis to identify winners and losers. The
determination of winning or losing is based on a
fund outperforming/underperforming a market
benchmark. The Morgan Stanley Capital
International world index (MSCI) is chosen as
the benchmark.
From the sample examined over the period
1996 to 2003, there is steady growth in number
of mutual funds with return data available.
Since the funds were established, none of
them dropped out during the study period. In
years 1997 and 2003, all funds underperformed
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Persistence in Mutual Fund Returns: New Zealand Evidence
119
the benchmark – MSCI; while in 2000 and
2001, no fund underperformed MSCI.
During the study period, when the
benchmark exhibits high returns, nearly all
losers (underperformers) in that year seem more
likely to repeat their poor performance the
following year. Also, the winners are less likely
to repeat their performance in years following
high market returns. Thus, the findings are that
there is no evidence to indicate that the
persistence of New Zealand growth mutual
funds performance lasted for the longer term
1996 to 2003. Moreover, during the short-term,
the persistence in a positive performance has a
similar weight to persistence in negative
performance.
While survivorship bias is acknowledged,
with both MSCI and average returns, the 25
initial funds that had existed during the entire 7
year study period managed to neither achieve a
winning streak or a losing streak. The
percentage of funds that have continuous
winning or losing streaks is less than would be
expected assuming that mutual fund
performance is a random occurrence. These
findings were confirmed by using the Spearman
Rank Non-parametric Method (SRM) to elicit
the existence of persistence. SRM gives an
objective confirmation of our findings as well as
possessing the advantage of not having to rely
on external benchmarks. Thus we may conclude
that New Zealand investors should look for
funds that are doing well but realize that there
will only be short run persistence.
Table 10
Risk adjusted pair-wise ranked differences for each Fund of two
consecutive years
1997 1998 1999 2000 2001 2002 2003
AMP Dynamic Trust 14.0 7.0 20.0 21.0 18.0 21.0 21.0
Public Trust Capital Growth Fund 2.0 2.0 6.0 17.0 2.0 5.0 9.0
Thoroughbred Growth Trust 23.0 11.0 15.0 12.0 23.0 16.0 13.0
Westpac Growth Trust 18.0 12.0 22.0 13.0 17.0 25.0 24.0
AMP Pers Super Performance 22.0 17.0 14.0 24.0 24.0 13.0 4.0
AMP PRP Dynamic 21.0 6.0 19.0 19.0 19.0 22.0 20.0
ANZ Retirement Plan Growth 4.0 3.0 11.0 3.0 4.0 9.0 8.0
Asteron RSP Mgd Growth 3.0 1.0 10.0 6.0 7.0 2.0 1.0
Asteron SP2000 Dynamic 1.0 14.0 8.0 18.0 5.0 8.0 2.0
Asteron Superplan Dynamic 5.0 18.0 13.0 23.0 12.0 10.0 3.0
AXA Goldline Invest-Aggressive 11.0 23.0 18.0 10.0 22.0 18.0 6.0
AXA Goldline Super-Aggressive 12.0 24.0 17.0 11.0 21.0 17.0 5.0
BT Ltp Mgd Growth Fund 10.0 15.0 9.0 1.0 1.0 15.0 7.0
Colonial Vision Entrepreneurial 9.0 20.0 12.0 2.0 10.0 11.0 18.0
Soverign Super High Growth Fund 15.0 9.0 5.0 9.0 8.0 7.0 17.0
Soverign Super Max Growth Fund 19.0 22.0 4.0 20.0 9.0 6.0 19.0
Tower Freedomplan Growth Fund 6.5 4.5 23.0 14.5 15.0 19.5 10.5
Tower Futureplan Growth Fund 6.5 4.5 24.0 14.5 16.0 19.5 10.5
Westpac Retire Plan Dynamic Fund 17.0 13.0 25.0 5.0 25.0 24.0 25.0
AMP Dynamic Bond 20.0 8.0 7.0 22.0 14.0 12.0 22.0
Asteron Lifeplan/Go Kidz Dynamic 13.0 21.0 2.0 25.0 6.0 3.0 16.0
AXA Zenith Mgd Portfolio 24.0 25.0 3.0 16.0 11.0 4.0 15.0
Colonial Stag Fund 25.0 19.0 1.0 8.0 3.0 1.0 23.0
Sovereign High Growth Fund 8.0 10.0 16.0 4.0 13.0 14.0 14.0
Sovereign Max Growth Fund 16.0 16.0 21.0 7.0 20.0 23.0 12.0
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
120
Table 11
Presence of “persistence” inferred at various levels of significance
97-98 98-99 99-00 00-01 01-02 02-03
AMP Dynamic Trust 49.0 169.0 1.0 9.0 9.0 0.0
Public Trust Capital Growth Fund 0.0 16.0 121.0 225.0 9.0 16.0
Thoroughbred Growth Trust 144.0 16.0 9.0 121.0 49.0 9.0
Westpac Growth Trust 36.0 100.0 81.0 16.0 64.0 1.0
AMP Pers Super Performance 25.0 9.0 100.0 0.0 121.0 81.0
AMP PRP Dynamic 225.0 169.0 0.0 0.0 9.0 4.0
ANZ Retirement Plan Growth 1.0 64.0 64.0 1.0 25.0 1.0
Asteron RSP Mgd Growth 4.0 81.0 16.0 1.0 25.0 1.0
Asteron SP2000 Dynamic 169.0 36.0 100.0 169.0 9.0 36.0
Asteron Superplan Dynamic 169.0 25.0 100.0 121.0 4.0 49.0
AXA Goldline Invest-Aggressive 144.0 25.0 64.0 144.0 16.0 144.0
AXA Goldline Super-Aggressive 144.0 49.0 36.0 100.0 16.0 144.0
BT Ltp Mgd Growth Fund 25.0 36.0 64.0 0.0 196.0 64.0
Colonial Vision Entrepreneurial 121.0 64.0 100.0 64.0 1.0 49.0
Soverign Super High Growth Fund 36.0 16.0 16.0 1.0 1.0 100.0
Soverign Super Max Growth Fund 9.0 324.0 256.0 121.0 9.0 169.0
Tower Freedomplan Growth Fund 4.0 342.3 72.3 0.3 20.3 81.0
Tower Futureplan Growth Fund 4.0 380.3 90.3 2.3 12.3 81.0
Westpac Retire Plan Dynamic Fund 16.0 144.0 400.0 400.0 1.0 1.0
AMP Dynamic Bond 144.0 1.0 225.0 64.0 4.0 100.0
Asteron Lifeplan/Go Kidz Dynamic 64.0 361.0 529.0 361.0 9.0 169.0
AXA Zenith Mgd Portfolio 1.0 484.0 169.0 25.0 49.0 121.0
Colonial Stag Fund 36.0 324.0 49.0 25.0 4.0 484.0
Sovereign High Growth Fund 4.0 36.0 144.0 81.0 1.0 0.0
Sovereign Max Growth Fund 0.0 25.0 196.0 169.0 9.0 121.0
Sum 1574.0 3296.5 3002.5 2220.5 672.5 2026.0
Spearman’s Rank Correlation 0.4 -0.3 -0.2 0.1 0.7 0.2
Degrees of Freedom (n-2) 23
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doc_568166475.pdf
Many studies have discussed mutual funds
performance, especially about the persistence of
excess returns. Regression is the most common
method to be used to research the fund
persistence. Dutta (2002) proposes a simpler
approach –a direct annual examination of
whether a fund beats a market proxy or not, to
research the persistence in American mutual
fund returns. In this study, authors use a similar
methodology to analyse New Zealand growth
mutual funds. In addition, a statistically robust
method is juxtaposed as a comparison. The
study finds that the most of the funds sampled
during the period 1996-2003 are unable to better
the benchmark of the world index.
Accounting Research Journal
Persistence in Mutual Fund Returns: New Zealand Evidence
Keith Hooper Howard Davey Roger Su Dani A.C. Foo
Article information:
To cite this document:
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Panayiotis G. Artikis, (2004),"Performance evaluation of the bond mutual
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Athanasios G. Noulas, J ohn A. Papanastasiou, J ohn Lazaridis, (2005),"Performance
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Persistence in Mutual Fund Returns: New Zealand Evidence
105
Persistence in Mutual Fund Returns:
New Zealand Evidence
Keith Hooper
Faculty of Business
Auckland University of Technology
Howard Davey
Waikato Management School
The University of Waikato
Roger Su
Equity Investment Advisers and Sharebrokers Limited
and
Dani A.C. Foo
Waikato Management School
The University of Waikato
Abstract
Many studies have discussed mutual funds
performance, especially about the persistence of
excess returns. Regression is the most common
method to be used to research the fund
persistence. Dutta (2002) proposes a simpler
approach –a direct annual examination of
whether a fund beats a market proxy or not, to
research the persistence in American mutual
fund returns. In this study, authors use a similar
methodology to analyse New Zealand growth
mutual funds. In addition, a statistically robust
method is juxtaposed as a comparison. The
study finds that the most of the funds sampled
during the period 1996-2003 are unable to better
the benchmark of the world index.
1. Introduction
There have been many debates about mutual
fund performance – especially about the
persistence of excess returns. The debate can be
divided into two parts: on one hand, those like
Carhart (1997) point out that mutual funds
excess performance does not persist, except in
the very short term; and, on the other hand,
those like Gruber (1996) and Elton, Gruber and
Blake (1996), who argue that excess
performance does persist and that past
performance can be a predictor of future
performance.
Dutta (2002) states that the prior researchers,
who test performance of samples of mutual
funds will typically concentrate on common
stock mutual funds. Research on persistence in
excess performance has examined samples of
mutual funds in various ways. Among the many
studies on performance of mutual funds, most
of studies control for differences in objectives
by including appropriate control variables in the
regression analysis. And, the tests are made
more robust by using conditional performance
evaluating and including net cash flow on a
sector-wide basis (Ferson and Warther (1996),
Gruber (1996) and Tiwari and Vijh (2001)).
Malkiel (1995) maintains that since
persistence of excess returns can only be tested
with a sample that includes funds that have
existed in both the base and the following
period, the sample characteristics must
necessarily be influenced by survivorship. Dutta
(2002) proposes a comparable but simpler
approach – a direct annual examination of
whether a fund beats a market proxy or not.
The simpler method is used in this study.
The excess performance and the persistence of
mutual fund performance is determined by
whether a fund outperforms or underperforms a
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
106
chosen market benchmark on an annual basis.
In this study, firms in the sample have their
stated investment objective as New Zealand
growth mutual funds market benchmark from
1996 to 2003. In addition, a statistically robust
method is juxtaposed as a comparison.
Drawing on New Zealand data, this paper
contributes its findings to the arguments as to
the most correct method to be employed.
Initially, the method of a direct annual
examination as to whether a fund beats the
chosen market proxy (or not) has also been
replicated in this paper. Morgan Stanley Capital
World Index (MSCI) is appointed as the
benchmark. The sample is examined over the
period 1996-2003. Participants in the sample
chosen are New Zealand growth mutual funds.
Further, this paper attempts to find evidence
of persistence independent of and apart from
using any benchmarks such as MSCI or the
Morgan Stanley New Zealand Index (MSNZI).
That is, attempting to extract from a selected
subset of the given dataset, statistically robust
evidence of persistence (if any). The paper
commences with a visual exploration of the
performance of the dataset, comparing selected
funds with the performance of the MSCI and
the MSNZI. Then, the paper replicates the
method used by Dutta (2002), by using the
same methodology against the same kind of
data. By way of comparison and corroboration,
the well known Spearman-Rank method, is used
to find any persistence information embedded in
the dataset.
The paper is organized into the following
sections: first, previous studies of performance
persistence; second, section three presents the
data and methodology; and the following
sections analyse the results of the study.
2. Previous Studies of Performance
Persistence
The paper complements Vos et al. (1995) by
examining an updated sample. Apart from
updating the work of Vos et al. (1995) the target
of this study is focused specifically on 42 New
Zealand fund performances, compared to 12
Australian and 14 New Zealand funds. Vos et
al. point out that investors want from active
managers the ability to obtain above average
results, while being diversified enough to avoid
the risk of sudden failure due to the swift
demise of major elements in the portfolio.
However, to achieve such success, based on
superior timing or superior portfolio selection,
would be a contradiction of the Efficient Market
Hypothesis. Some managers may achieve for a
time impressive returns but only within the
bounds of statistical probability. Thus, there is
always a probability that someone will achieve
above the market but there is no guarantee that
past returns will predict future performance –
any more than a coin that is tossed twice to
yield “heads” will achieve “heads” a third time.
Why does not past performance provide a basis
for future prediction? Troutman (1991) suggests
that different phases of the market suit different
fund managers, whose portfolio characteristics
may lean to certain sectors or to dividend yields
or growth stocks. As firms grow, there are
inevitable personnel changes and skills may be
transferred elsewhere.
As Vos et al. (1995) explain, studies on the
persistence of mutual fund performance have
been inconclusive. Beebower and Bergstrom
(1977) found evidence of some persistence for
risk adjusted returns, while Klemkosly (1977)
and Dunn and Theisen (1983) found a lack of
persistence. By contrast, more recently Grinblatt
and Titman (1992), Hendricks et al. (1993),
Goetzman and Ibbotson (1994) found evidence
of persistence. More importantly, Vos et al.
(1995) findings based on Australian and New
Zealand equity trusts found a lack of
persistence.
2.1 Short term persistence
On the other hand, Carhart (1997) argues that
the performance of mutual funds does persist
but only in the short term. His argument
supports the results of Hendricks et al. (1993) of
a short-term persistence in stock returns.
Carhart also finds persistence in poor
performance by the lowest decile of fund
performers.
Agarwal and Naik (2000) find only a
maximum persistence at a quarterly horizon
indicating that persistence among hedge fund is
of a short-term nature. They also point out that
there is no evidence of persistence using yearly
returns under the multi-period framework.
Casarin (2002) finds from a multi-periods
persistence analysis: (i) absence of long-run
excess persistence on total returns and on risk
adjusted returns; (ii) evidence of a “hot-hand”
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Persistence in Mutual Fund Returns: New Zealand Evidence
107
(positive performance always followed by
positive performance, winning following by
winning) effect on risk adjusted returns for four-
month intervals (short run persistence).
Dutta (2002), points out that in years when
the market benchmark (with S&P500 as the
benchmark) yields a high return, the losers
(underperformers) in that year seem more likely
to repeat their poor performance the following
year. Also, winners are less likely to repeat their
performance in years following high market
returns. In his paper, Dutta (2002) chooses a
sample over the period 1988 to 1996. Firms in
the sample have their stated investment
objective as growth equity. The author also
claims that persistence in positive performance
outweighs persistence in negative performance.
With regard to all the previous studies, most
of them use regression analysis to determine
performance and performance persistence and
generally report conflicting findings. Malkiel
(1995) argues that the persistence of mutual
funds can only be tested with a sample that
includes funds that have existed in both the base
and the following periods that is the sample
characteristics must necessarily be influenced
by survivorship. In the paper of Dutta (2002),
the performance and the persistence of mutual
fund performance is determined by whether a
fund outperforms or underperforms a chosen
market benchmark (S&P500) on an annual
basis.
3. Data and Methodology
The data used in the study are returns on all
available New Zealand growth mutual funds
from Fund Source (Fund Source is one of the
two main research houses in New Zealand, the
other one is Morningstar) over the period
November 1996 to November 2003. Three
growth mutual fund sections are chosen:
Diversified Growth Unit Trust and
Growth/Income Funds; Diversified Growth
Superannuation Funds; and, Diversified Growth
Insurance Bonds. The details of funds are
available in Table 1A, Table 1B and Table 1C.
The sample consists of 42 mutual funds over the
seven-year study. There were 25 funds
marketed in 1996, with the number growing
gradually to 42 in 2002. During the seven-year
period, none of the initial funds dropped out of
the data-set.
The Morgan Stanley Capital International
World Index (MSCI) simple annual return is
appointed as the benchmark, not S&P500 that
was used in many prior studies. In the allocation
of New Zealand growth mutual funds,
international equity gets a heavy weight
allocation – about 50% or more. A possible
reason for such a high allocation might be New
Zealand’s low market capitalization relative to
total funds under management, perhaps
exacerbated by compulsory superannuation.
Table 1A
Diversified growth unit trustand Gif’s performance %
96-97 97-98 98-99 99-00 00-01 01-02 02-03
AMP Dynamic trust 8.39 11.86 13.15 4.36 -7.88 -17.83 2.97
ANZ Long term growth fund -11.83 2.87
BT NZ - Managed growth 6.48 9.84 7.46 -1.46 -9.09 4.19
Fisher Funds Fledgling Fund -1.97 -6.04 4.2
Public Trust Capital Growth fund 7.12 7.98 9.45 2.7 -1.93 -6.04 3.94
Public Trust Growth Priority Fund 6.2 11.63 2.53 -2.58 -7.52 4.11
SBS Growth Fund 2.5 1.27 -8.27 3.68
Thoroughbred Growth Trust 4.76 7.95 11.47 5.81 -7.19 -12.57 5.21
Westpac Growth Trust 6.61 8.51 9.43 4.87 -6.45 -16.37 1.72
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
108
Table 1B
Diversified Growth Superannuation Fund Performance %
1997 1998 1999 2000 2001 2002 2003
AMP Pers Super performance 6.52 7.77 15.05 3.3 -9.33 -14.91 8.19
AMP PRP Dynamic 6.82 11.55 12.8 4.83 -7.72 -17.28 3.03
ANZ Retirement Plan Growth 6.58 6.74 7.97 4.85 -2 -6.38 3.79
ASB Easyplan Growth 16.2 6.21 -9.09 -12.96 4
Asteron Retirement Plus aggressive 18.38 21.12 4.1 -8.37 -4.84 14.69
Asteron RSP Mgd Growth 7.24 8.93 8.7 4.38 -2.53 -5.52 6.78
Asteron SP2000 Dynamic 7 4.54 8.95 2.47 -2.26 -6.61 5.97
Asteron Superplan Aggressive -3 -4.43 14.89
Asteron Superplan Dynamic 6.31 4.07 8.45 1.84 -3.23 -7.78 5.3
AXA Goldline Invest-Aggressive 6.02 2.71 8.44 4.62 -5.39 -10.03 5.04
AXA Goldline Super-Aggressive 6.02 2.71 8.45 4.61 -5.39 -10.03 5.05
BNZ Future Lifestyle-Dynamic Growth 11.1 13.27 4.88 -3.84 -11.46 2.22
BT Ltp Mgd Growth Fund 5.94 5.22 10.11 7.18 -1.56 -9.34 4.89
Colomial Masterpac-Dynamic Growth 10.07 16.51 6.38 -11.61 -14.27 2.33
Colonial Masterpac-mgd Growth 9.3 7.18 6.09 2.3 -7.99 2.4
Colonial vision Entrepreneurial 6.84 3.42 9.61 6.77 -3.17 -8.85 2.37
Sovereign Super High Growth fund 6.06 7.86 15.89 5.71 -3.78 -9.55 3.73
Sovereign Super Max Growth 7.38 5.34 22.46 4.73 -5.08 -11.9 3.38
Thoroughbred Growth Flexible 12.64 18.15 3.98 -9.5 -9.83 4.1
Thoroughbred Growth Locked-in 11.85 16 3.95 -9.22 -9.63 4.17
Tower Freedomplan Growth fund 8.87 9.38 7.28 4.16 -5.45 -12.18 5.11
Tower Futureplan Growth Fund 8.87 9.38 7.28 4.16 -5.45 -12.18 5.11
Tower IP Growth Fund -5.45 -12.18 5.11
Westpac Retire Plan Dynamic Fund 6.64 8.28 8.19 7.21 -8.54 -15.34 1.64
Table 1C
Diversified Growth Ins.Bonds Performance %
1997 1998 1999 2000 2001 2002 2003
AMP Dynamic Bond 8.32 12.49 21.23 4.42 -7.77 -17.79 3.09
ANZ Ascent Growth Fund -12.54 10.83
Asteron Lifeplan/Go Kidz Dynamic 6.31 4.07 17.01 1.84 -3.23 -7.78 3.62
Asteron Saverguard plus Aggressive 18.38 12.89 4.1 -8.37 -4.84 14.69
Asteron Wise Aggressive 22.86 9.5 4.78 -10.5 -5.61 14.05
AXA Zenith Mgd Portfolio 5.21 2.46 21.12 4.83 -5.44 -10.49 5.01
Colonial Stag Fund 3.65 6.05 21.51 6.59 -3.3 -8.86 2.18
Sovereign High Growth Fund 7.02 6.01 8.45 5.29 -3.77 -9.13 3.35
Sovereign Max Growth 5.34 5.8 7.5 5.65 -5.88 -11.93 4.52
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Persistence in Mutual Fund Returns: New Zealand Evidence
109
The S&P500 index comprises 500 shares in
USA, which does not represent the global
equity market. Thus, for many reasons, MSCI is
the most appropriate benchmark to be chosen in
the study. The performance of MSCI is shown
in Table 2 and Chart 1.
4. Preliminary Data Analysis
The returns of New Zealand growth mutual
funds are based on their annual performance.
Each return is calculated with fund prices from
November to November each year. To be
meaningful there needs to be a temporally
contiguous set of data of adequate length of
time. A dataset of 25 Funds is chosen for this
purpose as shown as Table 2. The year 1996
was deemed to be the base year upon which a
performance index for each of the funds is
respectively calculated. This anchor provides a
standard and an intuitively appealing
comparison between the performance of the
various funds and the chosen market indices,
viz, the MSCI and MSNZI. This provides a
common starting point.
Table 2
Performance of 25 funds, indexed on 1996
Funds\Years 1996 1997 1998 1999 2000 2001 2002 2003
AMP Dynamic Trust 100 108.39 121.25 137.19 143.17 131.89 108.37 111.59
Public Trust Capital Growth Fund 100 107.12 115.67 126.6 130.02 127.51 119.81 124.53
Thoroughbred Growth Trust 100 104.76 113.09 126.06 133.38 123.79 108.23 113.87
Westpac Growth Trust 100 106.61 115.68 126.59 132.76 124.19 103.86 105.65
AMP Pers Super Performance 100 106.52 114.8 132.07 136.43 123.7 105.26 113.88
AMP PRP Dynamic 100 106.82 119.16 134.41 140.9 130.02 107.56 110.82
ANZ Retirement Plan Growth 100 106.58 113.76 122.83 128.79 126.21 118.16 122.64
Asteron RSP Mgd Growth 100 107.24 116.82 126.98 132.54 129.19 122.06 130.33
Asteron SP2000 Dynamic 100 107 111.86 121.87 124.88 122.06 113.99 120.79
Asteron Superplan Dynamic 100 106.31 110.64 119.99 122.19 118.25 109.05 114.83
AXA Goldline Invest-Aggressive 100 106.02 108.89 118.08 123.54 116.88 105.16 110.46
AXA Goldline Super-Aggressive 100 106.02 108.89 118.09 123.54 116.88 105.16 110.47
BT Ltp Mgd Growth Fund 100 105.94 111.47 122.74 131.55 129.5 117.4 123.15
Colonial Vision Entrepreneurial 100 106.84 110.49 121.11 129.31 125.21 114.13 116.84
Soverign Super High Growth Fund 100 106.06 114.4 132.57 140.14 134.85 121.97 126.52
Soverign Super Max Growth Fund 100 107.38 113.11 138.52 145.07 137.7 121.32 125.42
Tower Freedomplan Growth Fund 100 108.87 119.08 127.75 133.07 125.81 110.49 116.14
Tower Futureplan Growth Fund 100 108.87 119.08 127.75 133.07 125.81 110.49 116.14
Westpac Retire Plan Dynamic Fund 100 106.64 115.47 124.93 133.93 122.5 103.71 105.41
AMP Dynamic Bond 100 108.32 121.85 147.72 154.25 142.26 116.95 120.57
Asteron Lifeplan/Go Kidz Dynamic 100 106.31 110.64 129.46 131.84 127.58 117.65 121.91
AXA Zenith Mgd Portfolio 100 105.21 107.8 130.57 136.87 129.43 115.85 121.65
Colonial Stag Fund 100 103.65 109.92 133.56 142.37 137.67 125.47 128.21
Sovereign High Growth Fund 100 107.02 113.45 123.04 129.55 124.66 113.28 117.08
Sovereign Max Growth Fund 100 105.34 111.45 119.81 126.58 119.13 104.92 109.66
Index based 1996 for MSNZI 100 114.022 74.951 85.477 73.534 71.218 77.585 86.312
Index based 1996 for MSCI 100 112.9 133.79 160.41 146.68 121.67 101.63 117.43
1 Year NZ Deposits
Raw 5.22 4.97 4.29 4.75 3.88 3.96 3.7
Indexed 100 105.22 110.45 115.19 120.66 125.34 130.31 135.13
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
110
These series are plotted in conjunction with
two benchmarks to gauge the relative
performance of the respective funds against the
two benchmarks. The performance for these
two indices is detailed at the bottom of Table 2.
By plotting these benchmarks together the
following chart (Chart 1) is obtained. From the
Chart, it appears that the selected funds
consistently outperform the MSNZI apart from
the initial year. The performance with regard to
the MSCI (World Index) is somewhat more
mixed. These raise issues of needing to choose
the right benchmark to gauge persistence and
whether the definition of persistence relative to
a benchmark is appropriate. However, it does
show, at least in the years studied, that the funds
have performed better than those investors who
rely solely on domestic equity.
The commentary is more telling when these
are juxtaposed with the cumulative returns
(refer to bottom of Table 2 – “1 Year NZ
Deposits) elicited from the Risk Free rate (ten
year Government Bond rate) for each of the
corresponding years.
Charts (2 and 3) below plot the risk free rate
against all the funds and market indices. It
appears that in the end, despite the active
interventions by fund managers, passive
investment at a risk free rate appeared to have
been the better of the two strategies for the
periods under consideration. However to be fair,
both the MSNZI and MSCI also
underperformed the risk free, passive
investment returns, especially in the later stages
of the period considered, as shown in the Chart
(3) below.
5. Dutta’s (2002) Methodology
To determine the performance following Dutta
(2002), a fund is designated as a winner in a
year it outperforms the market, and as a loser if
it underperforms the benchmark MSCI.
Table 3 presents the annual return and
standard deviation statistics for the sample, as
well as the number of New Zealand growth
mutual funds with data available in each year
since November 1996 to November 2003. As
Table 3 shows, there was steady growth in the
number of funds with return data available.
Among the total 42 funds, 25 are initial funds
that existed in 1996; the other 17 funds were
established between 1997 and 2003. Since the
funds were established, none of them dropped
out during the seven year period.
Chart 1
Comparison of the Indexed Performance:
MSCI, MSNZI and various Funds
1996
1997
1998
1999
2000
2001
2002
2003
60
80
100
120
140
160
1996 1997 1998 1999 2000 2001 2002 2003
MSCI is denoted by (1). MSNZI by (2)
Index
Value
(1)
(2)
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Persistence in Mutual Fund Returns: New Zealand Evidence
111
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
1996 1997 1998 1999 2000 2001 2002 2003
(1) Risk Free
Index Value
(1)
Chart 2
"Risk Free" against all Funds
Chart 3
Risk Free Performance against the Benchmarks
WI
(1)
(3)
(2)
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160.0
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Year
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WI NZ RF
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
112
Table 3
Annual Statistics of Growth Funds: Nov.1996- Nov.2003
Year Mean % Std. Dev. % N
1996-97 6.64 1.21 25
1997-98 8.51 4.59 35
1998-99 12.51 4.81 36
1999-00 4.69 1.47 37
2000-01 -5.11 3.19 40
2001-02 -10.24 3.63 42
2002-03 5.18 3.52 42
Given above are the annual mean returns and standard deviations for a sample of 42 New
Zealand growth mutual funds during 1996 to 2003.
Table 4
Annual Statistics for funds based on comparison with MSCI World Index
Year Under-performance Over-performance
Mean Std Dev N Mean Std Dev N
1997 6.64 1.21 25
1998 8.1 3.91 34 22.8 1
1999 11.12 3.39 31 21.49 0.56 5
2000 4.69 1.47 37
2001 -5.11 3.19 40
2002 -17.6 0.31 3 -9.66 3.09 39
2003 5.18 3.52 42
Given above are statistics for the sample of New Zealand growth mutual funds, based on whether the
fund managed to beat the simple annual MSCI Index return.
Table 4 examines performance and compares
the mean annual return between the two sub-
samples designated as under-performers and
out-performers. The MSCI world index is
chosen as the benchmark comparison. During
the seven year period, only in three years did
both underperforming and outperforming funds
exist in 1998, 1999 and 2002. In 1997 and 2003,
all the funds were underperforming; while all
funds beat the market MSCI index in 2000 and
2001.
Compared with prior studies, New Zealand
growth mutual funds appear to present a unique
phenomenon: when world index (MSCI)
performed well (positive return), all or most of
funds underperformed in 1997, 1998, 1999 and
2003; conversely, when MSCI benchmark
showed a negative return in 2000, 2001 and
2002, 92% to 100% of the New Zealand funds
outperformed the benchmark. The difference
between group performances is 14.7% (1998),
10.37% (1999) and 7.94% (2002). In the three
years, the difference in mean returns between
these two groups is significant, not only
statistically but also from casual observation.
Table 5 presents a view of one-year
persistence in terms of under-performance and
out-performance from 1996 to 2003. In the
seven-year period, the percentage of repeat
winners and losers are very similar. In the initial
year 1997, all the 25 funds underperformed the
MSCI. In the following year 1998 and in the
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Persistence in Mutual Fund Returns: New Zealand Evidence
113
final year 2003, all of the losers were losers
from the previous year. In 1999, 85% losers
were losers in previous year. In 2000-2001, out-
performing funds were the same winners from
previous years; while there was no under-
performer from previous years. In 2000 and
2001, all the winners continued to out-perform
as they had done in the previous year. In 2002,
most of the winners (97%) were winners from
2001; the remaining 3% were new to market.
However, in 1998, 1999 and 2003, none of
the winners repeated their winning performance
from previous years. During 2000 to 2002, none
of the losers is a loser from a previous year.
Thus, Table 5 demonstrates that neither winners
nor losers continue beating or underperforming
the benchmark during the study period.
The other finding from Table 5 is that, when
the global market performs well, for example
1998, 1999 and 2003, New Zealand growth
mutual funds persist with a high percentage of
losers. In the three high performing years,
MSCI gets individual returns of 18.5%, 19.9%
and 15.55%. While from 2000 to 2002, the
world capital market continues to exhibit
negative returns: –8.56%, -17.05% and –
16.47%, none of the losers repeat their
performance from previous years. These results
support Dutta (2002) that in the year when
market benchmark earns a high return, the
losers in that year seem more likely to repeat
their poor performance in the following years;
also the winners are less likely to repeat their
winning performance in years following high
market returns.
The difference between our findings and
those of previous studies is that Dutta (2002)
and this study is that Dutta (2002) and Malkiel
(1995) both believe that “hot hands” (winning
following by winning) occur much often than
“cold hands” (losing followed by losing) and
persistence in positive performance outweighs
persistence in negative performance. This
research finds that “hot hands” performance has
similar percentage to “cold hands” performance
during the study period.
In this study, neither winner nor loser
continues repeating their performance during
the seven year study period. In other words, the
result of the study supports Hendricks et al.
(1993), Carhart (1997) and Agarwal and Naik
(2000) that the performance of New Zealand
mutual funds does not indicate strong evidence
for excess persistence of performance, there
only is short-term persistence in stock returns.
The results may be explained as follows:
nearly all the losers in really good years are not
likely to repeat their losing performance; and the
winners in really poor years are not likely to
continue their winning performance. There is no
evidence to suggest that the persistence of New
Zealand growth mutual funds performance lasts
longer than two consecutive terms during the
study period. There appears to be a similar
spread of persistence of winners and persistence
of losers.
Table 6 divides the sample into two sub-
samples based on survivorship. Table 6A
presents statistics for the 25 growth mutual funds
that existed for the entire seven years of the
study period, while Table 6 B presents’ similar
statistics for the other 17 funds that have
between one year and six years of data available.
Table 5
Persistence of Fund Performance: Nov. 1996 – Nov.2003
Year Repeat Percent Repeat
Winner Loser Winner Loser Winner Loser
1996-97 25
1997-98 1 34 25 100%
1998-99 5 31 29 85%
1999-00 37 5 100%
2000-01 40 37 100%
2001-02 39 3 38 3 97%
2002-03 42 3 100%
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ACCOUNTING RESEARCH JOURNAL VOLUME 19 NO 2 (2006)
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Table 6A
New Zealand growth mutual funds with return data for each year,
1996–2003
Year Mean Std Dev. Min Max
1997 6.63 1.21 3.65 8.87
1998 6.84 2.87 2.46 12.49
1999 11.99 5.03 7.28 22.46
2000 4.68 1.47 1.84 7.21
2001 -4.94 2.25 -9.33 -1.56
2002 -11.06 3.75 -17.83 -5.52
2003 4.19 1.56 1.64 8.19
Table 6B
New Zealand Growth mutual fund without return data for each year,
1996–2003
Year Mean Std. Dev. Min Max
1997 0 0 0 0
1998 12.72 5.48 6.2 22.86
1999 13.84 4.17 7.18 21.12
2000 4.74 1.53 2.5 7.46
2001 -5.42 4.42 -11.61 2.3
2002 -9.02 3.16 -14.27 -4.43
2003 6.62 4.93 2.22 14.89
The difference of means between the two
groups is not highly significant in the years
from 1998 to 2003, with the lowest being –
0.48% (2001) to the highest being 5.08%
(1998). This differs from the reports by Dutta
(2002) and Malkiel (1995). The funds in Table
6B have higher returns than funds in Table 6A,
except for 2001. Malkiel (1995) states that
funds that underperformed frequently were
unlikely to survive; hence the surviving firms
would show biased performance, as well as
persistence. Dutta (2002) supports Malkiel
(1995), with the assumption that the later
entrants in the growth fund category as a group
seem to have significantly underperformed the
survivor group.
In the study period, the number of growth
mutual funds increased steadily (Table 3). Since
each fund was settled, none of them dropped
out of the sample. In Table 6B, none of the 17
non-surviving funds were in existence in 1996.
Even though the 25 initial funds survived during
the entire seven years and of those 17 funds
have higher returns in five of six years. Thus,
survivorship bias may not help to explain New
Zealand growth mutual funds performance
during 1996 to 2003.
Even though most of New Zealand mutual
funds have about 50% or more allocation on
international equity market, their returns are far
from matching the Morgan Stanley Capital
International Index returns during the study
period. Grinblatt and Titman (1992),
Goetzmann and Ibbotson (1994) and Hendricks
et al. (1993) present strong evidence that mutual
funds that achieve above average returns
continue to enjoy superior performance. They
prefer to use average returns rather than other
indices to examine fund performance. To
examine the above finding, Table 7 includes all
the 25 initial funds that existed during the seven
year study period; the average return is shown
on the bottom row.
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Persistence in Mutual Fund Returns: New Zealand Evidence
115
Among the 25 funds, not one has been either
underperforming or outperforming the average
return from 1996 to 2003. None of the funds
dropped out, though they did not continue to
beat the average return during the seven years.
Dutta (2002) found that 2.15% of initial
funds had managed to achieve winning
performance during his study period. In this
study, none of the 25 initial mutual funds
continued their winning streak or losing streak
during 1996 to2003 compared with either MSCI
or average return. So the percentage of those
funds which repeatedly won or lost each year
during the study period is zero. This result is
less than expected assuming that mutual fund
performance is a random occurrence. Achieving
a six year winning or losing streak has a 1.56%
probability, while a seven year winning or
losing streak has 0.78% probability. (Assuming
P is the probability that a winner fund continues
to be a winner fund in the next period, nobody
can expect the fund will persist or not, so P is
expected to be1/2 - a 50/50 probability outcome
is equally likely. If prior year’s results have no
influence on current year performance, for each
fund either winning or losing is equally likely
for each of seven years in the study period. For
P(29) - the probability of 29-year random
continuous winner or loser is less than 0.01%.
Table 7
All 25 Funds that existed during the seven year study period
96–97 97–98 98–99 99–00 2000–01 01–02 02–03
AMP Dynamic trust 8.39 11.86 13.15 4.36 -7.88 -17.83 2.97
Public Trust Capital Growth fund 7.12 7.98 9.45 2.7 -1.93 -6.04 3.94
Thoroughbred Growth Trust 4.76 7.95 11.47 5.81 -7.19 -12.57 5.21
Westpac Growth Trust 6.61 8.51 9.43 4.87 -6.45 -16.37 1.72
AMP Pers Super performance 6.52 7.77 15.05 3.3 -9.33 -14.91 8.19
AMP PRP Dynamic 6.82 11.55 12.8 4.83 -7.72 -17.28 3.03
ANZ Retirement Plan Growth 6.58 6.74 7.97 4.85 -2 -6.38 3.79
Asteron RSP Mgd Growth 7.24 8.93 8.7 4.38 -2.53 -5.52 6.78
Asteron SP2000 Dynamic 7 4.54 8.95 2.47 -2.26 -6.61 5.97
Asteron Superplan Dynamic 6.31 4.07 8.45 1.84 -3.23 -7.78 5.3
AXA Goldline Invest-Aggressive 6.02 2.71 8.44 4.62 -5.39 -10.03 5.04
AXA Goldline Super-Aggressive 6.02 2.71 8.45 4.61 -5.39 -10.03 5.05
BT Ltp Mgd Growth Fund 5.94 5.22 10.11 7.18 -1.56 -9.34 4.89
Colonial vision Entrepreneurial 6.84 3.42 9.61 6.77 -3.17 -8.85 2.37
Sovereign Super High Growth fund 6.06 7.86 15.89 5.71 -3.78 -9.55 3.73
Sovereign Super Max Growth 7.38 5.34 22.46 4.73 -5.08 -11.9 3.38
Tower Freedomplan Growth fund 8.87 9.38 7.28 4.16 -5.45 -12.18 5.11
Tower Futureplan Growth Fund 8.87 9.38 7.28 4.16 -5.45 -12.18 5.11
Westpac Retire Plan Dynamic Fund 6.64 8.28 8.19 7.21 -8.54 -15.34 1.64
AMP Dynamic Bond 8.32 12.49 21.23 4.42 -7.77 -17.79 3.09
Asteron Lifeplan/Go Kidz Dynamic 6.31 4.07 17.01 1.84 -3.23 -7.78 3.62
AXA Zenith Mgd Portfolio 5.21 2.46 21.12 4.83 -5.44 -10.49 5.01
Colonial Stag Fund 3.65 6.05 21.51 6.59 -3.3 -8.86 2.18
Sovereign High Growth Fund 7.02 6.01 8.45 5.29 -3.77 -9.13 3.35
Sovereign Max Growth 5.34 5.8 7.5 5.65 -5.88 -11.93 4.52
Average 6.63 6.84 11.99 4.68 -4.94 -11.06 4.19
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Funds\Years 1997 1998 1999 2000 2001 2002 2003
AMP Dynamic Trust 3.0 2.0 8.0 18.0 23.0 25.0 21.0
Public Trust Capital Growth Fund 7.0 9.0 13.0 22.0 2.0 2.0 13.0
Thoroughbred Growth Trust 24.0 10.0 10.0 5.0 20.0 19.0 5.0
Westpac Growth Trust 13.0 7.0 14.0 9.0 19.0 22.0 24.0
AMP Pers Super Performance 15.0 12.0 7.0 21.0 25.0 20.0 1.0
AMP PRP Dynamic 11.0 3.0 9.0 11.5 21.0 23.0 20.0
ANZ Retirement Plan Growth 14.0 13.0 22.0 10.0 3.0 3.0 14.0
Asteron RSP Mgd Growth 6.0 6.0 16.0 17.0 5.0 1.0 2.0
Asteron SP2000 Dynamic 9.0 19.0 15.0 23.0 4.0 4.0 3.0
Asteron Superplan Dynamic 16.5 20.5 18.0 24.5 7.5 5.5 4.0
AXA Goldline Invest-Aggressive 19.5 23.5 20.0 14.0 13.5 12.5 9.0
AXA Goldline Super-Aggressive 19.5 23.5 18.0 15.0 13.5 12.5 8.0
BT Ltp Mgd Growth Fund 21.0 18.0 11.0 2.0 1.0 10.0 11.0
Colonial Vision Entrepreneurial 10.0 22.0 12.0 3.0 6.0 7.0 22.0
Soverign Super High Growth Fund 18.0 11.0 6.0 6.0 11.0 11.0 15.0
Soverign Super Max Growth Fund 5.0 17.0 1.0 13.0 12.0 15.0 17.0
Tower Freedomplan Growth Fund 1.5 4.5 24.5 19.5 16.5 17.5 6.5
Tower Futureplan Growth Fund 1.5 4.5 24.5 19.5 16.5 17.5 6.5
Westpac Retire Plan Dynamic Fund 12.0 8.0 21.0 1.0 24.0 21.0 25.0
AMP Dynamic Bond 4.0 1.0 3.0 16.0 22.0 24.0 19.0
Asteron Lifeplan/Go Kidz Dynamic 16.5 20.5 5.0 24.5 7.5 5.5 16.0
AXA Zenith Mgd Portfolio 23.0 25.0 4.0 11.5 15.0 14.0 10.0
Colonial Stag Fund 25.0 14.0 2.0 4.0 9.0 8.0 23.0
Sovereign High Growth Fund 8.0 15.0 18.0 8.0 10.0 9.0 18.0
Sovereign Max Growth Fund 22.0 16.0 23.0 7.0 18.0 16.0 12.0
6. Using Non-Parametric Test for
Existence of “Persistence”
In an attempt to eliminate the subjectivity from
the method of direct examination used, we have
chosen, the Spearman Rank Non-parametric
Method (SRM) to elicit the existence of
persistence. Along with the objectivity, SRM
has the added advantage of not having to rely on
an external benchmark such as the MSCI World
Index. This avoids the issues of, first, debating
whether the benchmark is an appropriate
surrogate and, second, whether the manifested
persistence is an artifact of the choice of
benchmark. The persistence, if in existence, is
generated purely by information existing within
the data-set, without reference to or the need for
any external benchmark.
6.1 Methodology
6.1.1 Choice of a Data Subset.
To be meaningful, in SRM, the chosen Funds
must exist for the duration of the period being
studied. In this case, 25 of the 42 chosen funds
existed for the whole duration of 1997 through
2003.
The Data Subset of ranked raw
1
returns is
given in Table 8, where 1 is ranked the highest,
25 is ranked lowest and non-integers are results
of tied ranking.
6.1.2 Ranking of Raw Data (Non-Risk
Adjusted)
Each yearly column of returns in Table 9
shows returns converted into ranks of returns of
1 “Raw” here means “not risk adjusted”
Table 8
Spearman Ranked Raw Returns
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Table 9
Pair-wise ranked differences for each Fund of two consecutive years
Square of Differences of Ranks 97–98 98–99 99–00 00–01 01–02 02–03
AMP Dynamic Trust 1.0 36.0 100.0 25.0 4.0 16.0
Public Trust Capital Growth Fund 4.0 16.0 81.0 400.0 0.0 121.0
Thoroughbred Growth Trust 196.0 0.0 25.0 225.0 1.0 196.0
Westpac Growth Trust 36.0 49.0 25.0 100.0 9.0 4.0
AMP Pers Super Performance 9.0 25.0 196.0 16.0 25.0 361.0
AMP PRP Dynamic 64.0 36.0 6.3 90.3 4.0 9.0
ANZ Retirement Plan Growth 1.0 81.0 144.0 49.0 0.0 121.0
Asteron RSP Mgd Growth 0.0 100.0 1.0 144.0 16.0 1.0
Asteron SP2000 Dynamic 100.0 16.0 64.0 361.0 0.0 1.0
Asteron Superplan Dynamic 16.0 6.3 42.3 289.0 4.0 2.3
AXA Goldline Invest-Aggressive 16.0 12.3 36.0 0.3 1.0 12.3
AXA Goldline Super-Aggressive 16.0 30.3 9.0 2.3 1.0 20.3
BT Ltp Mgd Growth Fund 9.0 49.0 81.0 1.0 81.0 1.0
Colonial Vision Entrepreneurial 144.0 100.0 81.0 9.0 1.0 225.0
Soverign Super High Growth Fund 49.0 25.0 0.0 25.0 0.0 16.0
Soverign Super Max Growth Fund 144.0 256.0 144.0 1.0 9.0 4.0
Tower Freedomplan Growth Fund 9.0 400.0 25.0 9.0 1.0 121.0
Tower Futureplan Growth Fund 9.0 400.0 25.0 9.0 1.0 121.0
Westpac Retire Plan Dynamic Fund 16.0 169.0 400.0 529.0 9.0 16.0
AMP Dynamic Bond 9.0 4.0 169.0 36.0 4.0 25.0
Asteron Lifeplan/Go Kidz Dynamic 16.0 240.3 380.3 289.0 4.0 110.3
AXA Zenith Mgd Portfolio 4.0 441.0 56.3 12.3 1.0 16.0
Colonial Stag Fund 121.0 144.0 4.0 25.0 1.0 225.0
Sovereign High Growth Fund 49.0 9.0 100.0 4.0 1.0 81.0
Sovereign Max Growth Fund 36.0 49.0 256.0 121.0 4.0 16.0
Sum 1074.0 2694.0 2451.0 2772.0 182.0 1842.0
Spearman’s Rank Correlation R
2
0.6 0.0 0.1 -0.1 0.9 0.3
decreasing order (i.e. the higher returns are
ranked higher). Then, in a pair-wise manner, the
differences of the ranks for each Fund of two
consecutive years are derived. As some of these
will result in negative signs, SRM dictates that
these pair-wise differences be squared. Hence
we have Table 9 after the data subset is
transformed.
Each column is summed and the Spearman
Rank formula:
R
2
= 1 – (6 ?d
2
/(n3 – n))
where d = pair-wise difference between ranks of
returns of consecutive years n = number of
funds in the data-subset.
The Spearman’s R
2
figures are given in the
bottom row of the Table 9 above. According to
SRM the closer R
2
is to +1 or -1, the stronger
the likely correlation between the two related
years. A perfect positive correlation is +1 and a
perfect negative correlation is -1.
From the results above, the correlations
between years 1997-98 (column 1) and years
2001-02 are 0.6 and 0.9 respectively. These are
considered to be strong. The rest of the pair-
wise relationships were weak or non-existent.
To further gauge the significance of the two
strong correlations we need to refer to the
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Spearman Rank Significance Table.
2
For this
we need to find the degrees of freedom which is
the number of pairs per column minus 2
(i.e. n-2). In this case we have n=25 hence n-2 =
23. The degrees of freedom equal 23. The
periods (1997-98) and (2001-02) are significant
with p-values of 0.01 (or 99% level). For the
given the data-set it appears that strong
persistence was manifested for the funds from
the years 1997 to 1998 and 2001 to 2002; and
moderate (90% level) persistence was
manifested for the funds in 2002 to 2003.
6.2 Ranking of Risk Adjusted Data
Risk adjustment in this context means taking the
volatility of the data series into account when
the data set is ranked. Here, the (ex-post facto)
standard deviation of each of the Funds is
calculated and used as the surrogate of risk.
Risk adjustment in this case means getting the
quotient of the yearly returns and the volatility
of the same data series. This measure is roughly
akin to the Sharpe Ratio.
It provides a reasonably objective measure of
risk adjustment (i.e. returns per unit of
volatility) and provides an acceptable
approximation for risk adjustment. Further, the
use of the risk free rate (per Sharpe Ratio) is not
considered to be meaningful in this case.
3
Table 10 below has the same type of returns-
ranks for the same Funds previously but
adjusted for risk.
Persistence is observed in Table 11 for the
same time periods albeit at lower statistical
significance. Partially reproducing the Pearson
R Table here at around 23 degrees of freedom
we have the following:
Df = n -2
df \Level of Significance
(p) for Two-Tailed Test
0.1 0.05 0.02 0.01
23 0.337 0.396 0.462 0.505
For years 1997-98 and 2001-02 we appear to
have short-term persistence that is significant
at 95% and 99% levels of significance,
2 Since the sample size is 25, for technical reasons, the
Pearson R table is consulted instead of the Spearman
Rank.
3 Preliminary data analysis showed that most of the funds
under-performed the chosen “risk free” surrogate.
Further, here we are interested only on whether Funds
show “persistence.”
respectively. This means that when a fund first
attains a high ranking it will most likely to be
highly ranked for the following year as well, but
this persistence does not normally last more
than that duration. There does not seem to be
any significant anti-persistence, that is, when a
firm first attains high ranking it is unlikely to
swing to a relatively low ranking in the
following year. Conversely, relatively low
ranking Funds are not likely to suddenly
achieve high ranking in the following year.
The implication for potential investors in
Funds appears to be that they look for Funds
that do well suddenly and bet on these for the
short term. Further they should probably avoid
the long odds by avoiding Funds that have not
performed well currently. The assumption here
is that the Funds allow one to exit and enter
easily and that the transaction costs are
negligible.
7. Conclusion
Many earlier studies had been undertaken to
analyse the persistence of mutual funds
performance; and much debate has ensued due
to conflicting results. However, most studies of
persistence share a methodology which controls
for difference by including appropriate control
variables in the regression analysis. Also, these
tests are made more robust by using conditional
performance evaluation (Ferson and
Warther,1996 and Gruber, 1996).
Malkiel (1995) suggests that survivorship
bias may help to explain the persistence of
mutual fund performance. Dutta (2002) adopts a
simpler and direct methodology to examine the
persistence of mutual fund performance. This
study examines the returns on a sample of New
Zealand growth mutual funds over the period
1996-2003 with the same methodology as Dutta
(2002). The sample is examined on an annual
basis to identify winners and losers. The
determination of winning or losing is based on a
fund outperforming/underperforming a market
benchmark. The Morgan Stanley Capital
International world index (MSCI) is chosen as
the benchmark.
From the sample examined over the period
1996 to 2003, there is steady growth in number
of mutual funds with return data available.
Since the funds were established, none of
them dropped out during the study period. In
years 1997 and 2003, all funds underperformed
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the benchmark – MSCI; while in 2000 and
2001, no fund underperformed MSCI.
During the study period, when the
benchmark exhibits high returns, nearly all
losers (underperformers) in that year seem more
likely to repeat their poor performance the
following year. Also, the winners are less likely
to repeat their performance in years following
high market returns. Thus, the findings are that
there is no evidence to indicate that the
persistence of New Zealand growth mutual
funds performance lasted for the longer term
1996 to 2003. Moreover, during the short-term,
the persistence in a positive performance has a
similar weight to persistence in negative
performance.
While survivorship bias is acknowledged,
with both MSCI and average returns, the 25
initial funds that had existed during the entire 7
year study period managed to neither achieve a
winning streak or a losing streak. The
percentage of funds that have continuous
winning or losing streaks is less than would be
expected assuming that mutual fund
performance is a random occurrence. These
findings were confirmed by using the Spearman
Rank Non-parametric Method (SRM) to elicit
the existence of persistence. SRM gives an
objective confirmation of our findings as well as
possessing the advantage of not having to rely
on external benchmarks. Thus we may conclude
that New Zealand investors should look for
funds that are doing well but realize that there
will only be short run persistence.
Table 10
Risk adjusted pair-wise ranked differences for each Fund of two
consecutive years
1997 1998 1999 2000 2001 2002 2003
AMP Dynamic Trust 14.0 7.0 20.0 21.0 18.0 21.0 21.0
Public Trust Capital Growth Fund 2.0 2.0 6.0 17.0 2.0 5.0 9.0
Thoroughbred Growth Trust 23.0 11.0 15.0 12.0 23.0 16.0 13.0
Westpac Growth Trust 18.0 12.0 22.0 13.0 17.0 25.0 24.0
AMP Pers Super Performance 22.0 17.0 14.0 24.0 24.0 13.0 4.0
AMP PRP Dynamic 21.0 6.0 19.0 19.0 19.0 22.0 20.0
ANZ Retirement Plan Growth 4.0 3.0 11.0 3.0 4.0 9.0 8.0
Asteron RSP Mgd Growth 3.0 1.0 10.0 6.0 7.0 2.0 1.0
Asteron SP2000 Dynamic 1.0 14.0 8.0 18.0 5.0 8.0 2.0
Asteron Superplan Dynamic 5.0 18.0 13.0 23.0 12.0 10.0 3.0
AXA Goldline Invest-Aggressive 11.0 23.0 18.0 10.0 22.0 18.0 6.0
AXA Goldline Super-Aggressive 12.0 24.0 17.0 11.0 21.0 17.0 5.0
BT Ltp Mgd Growth Fund 10.0 15.0 9.0 1.0 1.0 15.0 7.0
Colonial Vision Entrepreneurial 9.0 20.0 12.0 2.0 10.0 11.0 18.0
Soverign Super High Growth Fund 15.0 9.0 5.0 9.0 8.0 7.0 17.0
Soverign Super Max Growth Fund 19.0 22.0 4.0 20.0 9.0 6.0 19.0
Tower Freedomplan Growth Fund 6.5 4.5 23.0 14.5 15.0 19.5 10.5
Tower Futureplan Growth Fund 6.5 4.5 24.0 14.5 16.0 19.5 10.5
Westpac Retire Plan Dynamic Fund 17.0 13.0 25.0 5.0 25.0 24.0 25.0
AMP Dynamic Bond 20.0 8.0 7.0 22.0 14.0 12.0 22.0
Asteron Lifeplan/Go Kidz Dynamic 13.0 21.0 2.0 25.0 6.0 3.0 16.0
AXA Zenith Mgd Portfolio 24.0 25.0 3.0 16.0 11.0 4.0 15.0
Colonial Stag Fund 25.0 19.0 1.0 8.0 3.0 1.0 23.0
Sovereign High Growth Fund 8.0 10.0 16.0 4.0 13.0 14.0 14.0
Sovereign Max Growth Fund 16.0 16.0 21.0 7.0 20.0 23.0 12.0
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Table 11
Presence of “persistence” inferred at various levels of significance
97-98 98-99 99-00 00-01 01-02 02-03
AMP Dynamic Trust 49.0 169.0 1.0 9.0 9.0 0.0
Public Trust Capital Growth Fund 0.0 16.0 121.0 225.0 9.0 16.0
Thoroughbred Growth Trust 144.0 16.0 9.0 121.0 49.0 9.0
Westpac Growth Trust 36.0 100.0 81.0 16.0 64.0 1.0
AMP Pers Super Performance 25.0 9.0 100.0 0.0 121.0 81.0
AMP PRP Dynamic 225.0 169.0 0.0 0.0 9.0 4.0
ANZ Retirement Plan Growth 1.0 64.0 64.0 1.0 25.0 1.0
Asteron RSP Mgd Growth 4.0 81.0 16.0 1.0 25.0 1.0
Asteron SP2000 Dynamic 169.0 36.0 100.0 169.0 9.0 36.0
Asteron Superplan Dynamic 169.0 25.0 100.0 121.0 4.0 49.0
AXA Goldline Invest-Aggressive 144.0 25.0 64.0 144.0 16.0 144.0
AXA Goldline Super-Aggressive 144.0 49.0 36.0 100.0 16.0 144.0
BT Ltp Mgd Growth Fund 25.0 36.0 64.0 0.0 196.0 64.0
Colonial Vision Entrepreneurial 121.0 64.0 100.0 64.0 1.0 49.0
Soverign Super High Growth Fund 36.0 16.0 16.0 1.0 1.0 100.0
Soverign Super Max Growth Fund 9.0 324.0 256.0 121.0 9.0 169.0
Tower Freedomplan Growth Fund 4.0 342.3 72.3 0.3 20.3 81.0
Tower Futureplan Growth Fund 4.0 380.3 90.3 2.3 12.3 81.0
Westpac Retire Plan Dynamic Fund 16.0 144.0 400.0 400.0 1.0 1.0
AMP Dynamic Bond 144.0 1.0 225.0 64.0 4.0 100.0
Asteron Lifeplan/Go Kidz Dynamic 64.0 361.0 529.0 361.0 9.0 169.0
AXA Zenith Mgd Portfolio 1.0 484.0 169.0 25.0 49.0 121.0
Colonial Stag Fund 36.0 324.0 49.0 25.0 4.0 484.0
Sovereign High Growth Fund 4.0 36.0 144.0 81.0 1.0 0.0
Sovereign Max Growth Fund 0.0 25.0 196.0 169.0 9.0 121.0
Sum 1574.0 3296.5 3002.5 2220.5 672.5 2026.0
Spearman’s Rank Correlation 0.4 -0.3 -0.2 0.1 0.7 0.2
Degrees of Freedom (n-2) 23
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