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

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.

Bond Fund Performance During Recessions and Expansions: Empirical Evidence from a Small Market

This paper provides the first investigation about bond mutual fund performance during recession and expansion periods separately. Based on multi-factor performance evaluation models, results show that bond funds significantly underperform the market during both phases of the business cycle. Nevertheless, unlike equity funds, bond funds exhibit considerably higher alphas during good economic states than during market downturns. These results, however, seem entirely driven by the global financial crisis subperiod. In contrast, during the recession associated to the Euro sovereign debt crisis, bond funds are able to accomplish neutral performance. This improved performance throughout the debt crisis seems to be related to more conservative investment strategies, which reflect an increase in managers’ risk aversion.

The conditional performance of euro bond funds: evidence from Portugal during the debt crisis

This paper evaluates the performance of a survivorship bias-free data set of Portuguese funds investing in Euro-denominated bonds by using conditional models that consider the public information available to investors when the returns are generated. We find that bond funds underperform the market significantly and by an economically relevant magnitude. This underperformance cannot be explained by the expenses they charge. Our findings support the use of conditional performance evaluation models, since we find strong evidence of both time-varying risk and performance, dependent on the slope of the term structure and the inverse relative wealth variables. We also show that survivorship bias has a significant impact on performance estimates. Furthermore, during the European debt crisis, bond fund managers performed significantly better than in non-crisis periods and were able to achieve neutral performance. This improved performance throughout the crisis seems to be related to changes in funds’ investment styles.