Investigating the Performance and Performance Consistency of Iranian Mutual Funds Using CAPM & CARHARTs Four- Factor Models; A Comparative Approach

This study seeks to investigate the performance as well as the perfor- mance consistency of Iranian mutual funds during the current and sub- sequent periods. To this end, the Capital Asset Pricing Model along with CARHARTs four-factor model have been utilized to analyze the performance and performance consistency of investment funds. In or- der to examine persistency, all models are divided into 10 portfolios (10 distributions) based on the performance of the past one-year. Then we considered succeeding 12 months later. Our results revealed that mutual funds in Iran have not outperformed the market, but there is a per- formance consistency. This means that the mutual funds with the best performance (worst performance) will perform in the same way (better or worse) in the upcoming years. However, the extent of the best and worst performance is not significantly different. The historical performance of mutual funds can, to some extent, explain the future performance. Therefore, investors’ reliance on the backgrounds of investment funds as a recourse for investment is well justified. In other words, if investors invest on mutual funds with a past outperformance, there is a reasonable assurance to be repeated the past. The opposite assertion is also true.