U.S. Mutual Fund Performance in Recessions and Expansions, 1977 to 2019.

Abstract

Using a sample of 2680 U.S. actively managed open-end mutual funds in the period from January 1977 through December 2018, we investigate whether actively managed mutual funds are able to outperform a passive benchmark over a 504-month sample. We highlight whether mutual funds are able to generate abnormal returns during NBER expansions and recessions. We find that an equalweighted portfolio of net returns has a statistically significant abnormal return in expansion, but not in recession. Further, we find evidence of strong superior performance and underperformance by a small group of actively managed mutual funds.