Swedish Mutual Fund Performance and Persistence

Abstract: This paper presents an overview of the Swedish mutual fund industry and investigates the prevalence of performance persistence using a sample of 139 funds during 2005 - 2020. The study is conducted using the Capital Asset Pricing Model for determining funds' alpha during a specific period, and analyses if an investment strategy based on past performance can consistently generate returns in excess of the market. In addition, we investigate whether funds with an ESG theme or funds investing exclusively in stocks with small market capitalisation outperform their counterparts. Finally, the performance persistence in ESG and small cap funds, respectively, is studied. Our overall results suggest that both positive and negative performance persistence exists in the Swedish mutual fund market, but only conclusively during an annual evaluation and holding period and with ambiguous inferences during a biannual periodisation depending on the market benchmark. Persistence does not seem to be more or less prevalent in ESG or small cap funds. Furthermore, our results imply that small cap funds outperform their counterparts while ESG funds fail to yield returns on par with funds lacking an ESG theme. Our results agree with most studies suggesting performance persistence exists on an annual evaluation basis.