The authors show that past mutual fund performance carries information about future performance: Funds that did well in the past tend to do well in the future on a risk-adjusted basis. Portfolios based on past fund performance significantly outperform portfolios composed of an equal amount of each fund. In addition, the authors are able to form a combination of actively managed portfolios with the same risk as a portfolio of index funds but with higher mean return.
Journal of Business, Vol. 69, No. 2 (April 1996): 133-57
