This paper discusses the validity and the reliability issues of mutual fund performance measurement and, particularly, the factors that should be taken into account in the research and design of the studies on performance persistence. Conventional test procedures employed in performance persistence studies are subject to many biases that may induce spurious consistency in performance. Especially in the case of equity funds, persistence often proves to be spurious when differences in portfolio characteristics are taken into account in performance evaluation techniques.

A Closer Look at Performance Persistence of Mutual Funds