Abstract

This study aimed to examine the performance evaluation and persistence of equity mutual funds when the market reverses from a bull market to a bear market. We also attempt to find the appropriate performance evaluation indicators when funds exhibit performance reversal. Such an indicator will be of great assistance to investors in making investment decisions. Therefore, this study investigates the performance of 30 equity mutual funds in Taiwan. The data cover 500 dealing days from November 2006 to October 2008, with an emphasis on the 2007 financial crisis. There were two main findings in our study. First, we found that different performance measures led to significantly diverging rankings of mutual funds in different market climates. Second, the result of the persistence test showed that when the market climate shifts from bull to bear market, using the GRAROC model is the best indicator of future mutual fund performance.

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