The recent introduction in Italian mutual fund market of Morningstar performance rating performed by private institutions gives rise to the question of which is the relation between this relative benchmark measure and the other traditional performance measures. This paper provides a comprehensive analysis of the relative benchmark performance measure (Morningstar rating) applied to Italian equity funds. We find that this performance measure is highly correlated with the classical performance measures (Sharpe ratio, Sortino ratio and Treynor ratio) and lowly correlated with the customized benchmark measure (Information ratio). Furthermore, performing a persistence analysis, using non parametric methods called Cross-Product Ratio and Chi-Squared test, we observe that only Morningstar rating measure generates a strong degree of persistence. Our results deviate from most European studies that argue Italian mutual funds display weak persistence.

Relative benchmark rating and persistence analysis: Evidence from Italian equity funds

CASARIN, Roberto;PELIZZON, Loriana;SARTORE, Domenico
2005

Abstract

The recent introduction in Italian mutual fund market of Morningstar performance rating performed by private institutions gives rise to the question of which is the relation between this relative benchmark measure and the other traditional performance measures. This paper provides a comprehensive analysis of the relative benchmark performance measure (Morningstar rating) applied to Italian equity funds. We find that this performance measure is highly correlated with the classical performance measures (Sharpe ratio, Sortino ratio and Treynor ratio) and lowly correlated with the customized benchmark measure (Information ratio). Furthermore, performing a persistence analysis, using non parametric methods called Cross-Product Ratio and Chi-Squared test, we observe that only Morningstar rating measure generates a strong degree of persistence. Our results deviate from most European studies that argue Italian mutual funds display weak persistence.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/31185
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