Norwegian mutual fund performance based on Fama and French´s five-factor model

Abstract

The following paper uses a dataset free of survivorship bias for the period 2002-2011. We investigate whether Norwegian mutual funds possess enough skills to outperform a passive benchmark based on Fama and French’s five-factor model. Our results suggest that the mutual fund industry exhibits significant excess returns on a 10% level in the recent financial crisis. Further, we examine whether the results obtained by the five-factor model are greater than the results obtained by the three-factor model. Our findings indicate that the five-factor model is better to explain the volatility in returns compared to previous models. Moreover, we do not find any evidence of performance persistence among Norwegian mutual funds. The bootstrapping results indicate significant inferior performance in the whole sample and the pre-crisis period. However, we do find evidence of managerial skills for the two best performing funds in the crisis period.