Performance and persistence of performance of healthcare mutual funds

Abstract

This study analyzes 115 actively managed domestic healthcare mutual funds over the period 1/2000 –12/2011. Findings of this study show that, on average, healthcare mutual funds outperform the passive index by roughly 2.97% per year after controlling for the market risk premium, growth and size premiums, and momentum effects. Further, this study documents that the abnormal over- and under-performance does not persist over subsequent periods. In other words, under- and over- performances are mean reverting.