The impact of the Eurozone sovereign debt crisis on bond fund performance persistence: Evidence from a small market

Published in: Investment Analysts Journal
Volume 45, issue sup1, 2016, pages: S32–S45
DOI: 10.1080/10293523.2016.1195033
Author(s): Paulo LeiteApplied Management Research Unit (UNIAG), Portugal, Orlando FariaMedicavado Group – Insurance Company, Portugal, Manuel Rocha ArmadaNIPE – School of Economics and Management, Portugal


We evaluate the impact of the Eurozone sovereign debt crisis on the performance and performance persistence of a survivorship bias-free sample of bond funds from a small market, identified as one of the most affected by this event, during the 2001–2012 period. Besides avoiding data mining, we also introduce a methodological innovation in assessing bond fund performance persistence. Our results show that bond funds underperform significantly both during crisis and non-crisis periods. Besides, we find strong evidence of performance persistence, for both short- and longer-term horizons, during non-crisis periods but not during the debt crisis. In this way, the persistence phenomenon in small markets seems to occur only during non-crisis periods and this is valuable information for bond fund investors to exploit.

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