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Vincent Fromentin and Christine Louargant
''Is the rating given to a European mutual fund a good indicator of its future performance?''
( 2014, Vol. 34 No.2 )
The objective of this paper is to investigate whether the rating of a fund is a determinant of its future performance. This study focuses on the Fundclass ratings for a sample of 1,452 EU funds with a similar style of management for the period 2003–12 (a period marked by economic crisis). By using the methodology of non-stationary panel data, we simultaneously assess the long- and short-term relationship between fund performance and scoring, using a vector error correction model. Our results conclude that there is a positive relationship between these two variables over time. Nevertheless, in the short term, this relationship is only valid for the period 2007–12, especially for funds with a good rating.
Keywords: rating, performance, investment funds, panel data, cointegration, vector models
JEL: G2 - Financial Institutions and Services: General
Manuscript Received : Apr 18 2014 Manuscript Accepted : Jun 18 2014

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