United States-based international mutual funds: Performance and persistence

This study examines market behavior of U.S.-based international mutual funds that invest solely in the international equity markets from 2005 to 2009. With a reputation of high expense ratio, these funds outperform the stock market indices; and their performances can be explained by fund characteristics, such as size, turnover ratio, and beta. Funds are categorized as winners or losers based on their relative performance in the category. The probability of winner funds becoming loser funds or vice versa is close to 50%. The post one- to three-year annualized returns for winner funds and loser funds are very similar. Thus, the relative performance of one fund to another appears more like a random walk than a persistent trend.