CHAPTER 12Conditional Performance Evaluation

Individual investors and institutional investors are always seeking to find active portfolio managers able to deliver abnormal excess performance—expected returns in excess of suitable benchmarks. Yet evidence that a subset of active managers can deliver consistently superior returns remains controversial.1 Some persistence-in-performance studies have found that the past performance of mutual funds provides some predictive value for future performance.2

In estimating abnormal excess performance for a sample of pension fund portfolio managers, Christopherson and Turner concluded that the past performance of a manager’s portfolio provides little or no useful information about expected future performance. ...

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