Predictability of Mutual Fund Performance - Evidence from the Swedish Market

Abstract: This paper studies the out-of-sample performance of three established mutual fund performance predictors in Sweden. Our study draws inspiration from the work of Jones and Mo (2016). We analyse the momentum, back testing and selectivity predictors, based on previously introduced methodologies, as well as our own revised approaches. Our results only partly confirm those of the original studies, as the predictors exhibit diverse performance. While the momentum predictor underperforms three Swedish equity benchmark indexes, the back testing predictor exhibits unclear results. The selectivity predictor outperforms the other two methodologies and all our benchmarks. Our results are gross of all fees and expenses. Estimated alphas from Carhart (1997) four-factor regressions are positive and significant for the modified back testing predictor and for both approaches of the selectivity predictor. The results are potentially important for investors in Swedish mutual funds.