Manipulation and performance persistence: an examination of Iranian equity mutual fund performance

Abstract

Purpose

This paper aims to study manipulation and performance persistence in equity mutual funds. To this end, Manipulation-Proof Performance Measure (MPPM) and Doubt Ratio, along with a number of current performance measures are used to evaluate the performance of equity mutual funds in Iran.

Design/methodology/approach

The authors investigate performance manipulation by 1) comparing the results of the MPPM with the current performance measures, 2) checking the Doubt Ratio to detect suspicious funds. Additionally, the authors investigate performance persistence by forming and evaluating portfolios of the equity mutual funds at several time horizons.

Findings

The authors conclude that there is no evidence of performance manipulation in the equity mutual funds. Additionally, when comparing the performance of the upper (top) tertile portfolios and the lower tertile portfolios, in all of the studied 1, 3, 6 and 12-month horizons, the authors find performance persistence in the equity mutual funds.

Originality/value

To the best of the authors’ knowledge, this research is the first study to investigate the performance manipulation in the Iranian equity mutual funds, and also is the first study in Iran that uses the MPPM and the Doubt Ratio in addition to a number of current performance measures to investigate the performance persistence in the equity mutual funds at several time horizons.

Citation

Hosseini, M., Khodaei Valahzaghard, M. and Saeedi, A. (2022), "Manipulation and performance persistence: an examination of Iranian equity mutual fund performance", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 15 No. 3, pp. 586-601. https://doi.org/10.1108/IMEFM-07-2020-0376