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https://www.ifa.com/articles/luck_skill ... scorecard/
The Persistence Scorecard answers a very simple question: If we have an active fund that was in the top half of its peer group over the prior year, what are the odds that it will remain there in subsequent time periods?
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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The article suggests a slight persistence. If performance were completely random, 1/32=3.13% of all funds would be in the top half five years in a row; the actual number is 3.84%.
And this is what would be expected. Funds with below-average expenses have higher expected returns, and funds which are close to their peer group averages in holdings are likely to match the peer group before expenses.
In particular, this suggests which funds are most likely to beat the peer group average consistently: broad-based index funds. Any low-cost S&P 500 index has been in the top half of large-cap blend every year since at least 2010 (I can't get category returns from further back). Vanguard Mid-Cap Index has been in the top half every year since 2013. Vanguard Small-Cap Index has a higher cap range than most funds which Morningstar considers small-cap, so it missed the top half in 2016 when small-caps outperformed midcaps.