@article {Malkiel1, author = {Burton G. Malkiel and Atanu Saha}, title = {Practical Applications of Mutual Fund Returns and Their Characteristics: A Simple Approach to Selecting Better-Performing Actively Managed Funds}, volume = {9}, number = {1}, pages = {1--7}, year = {2021}, doi = {10.3905/pa.9.1.437}, publisher = {Institutional Investor Journals Umbrella}, abstract = {In Mutual Fund Returns and their Characteristics: A Simple Approach to Selecting Better-Performing Actively Managed Funds, from the April 2020 edition of The Journal of Investing, Burton G. Malkiel of Princeton University and Atanu Saha of Econ One Research discuss which mutual-fund attributes best predict future fund returns. The authors find that fund selection guided by a combination of characteristics{\textemdash}low turnover rates, low expense ratios, and high Sharpe ratios{\textemdash}can lead to portfolios that considerably outperform the average actively managed fund.The authors use a robust dataset comprising prices on US and international equity funds from 2000 to 2018. They investigate the persistence of fund attributes{\textemdash}fund age, size, net asset flows, prior-year returns, turnover rates, Sharpe ratios and expense ratios{\textemdash}in auguring future returns, both year-over-year and longer term. While verifying that expense ratios are significant predictors of a fund{\textquoteright}s future returns, they stress that Sharpe ratios and turnover rates are even more predictive. Investors are encouraged to apply all three traits together to build better-performing fund portfolios. Moreover, these cost and risk-control characteristics persist enough to enable investors to dependably detect funds with extended, and statistically significant, above-average returns. TOPICS: Portfolio theory, portfolio construction, style investing}, issn = {2329-0196}, URL = {https://pa.pm-research.com/content/9/1/1.11}, eprint = {https://pa.pm-research.com/content/9/1/1.11.full.pdf}, journal = {Practical Applications} }