Evaluating the rating of stiftung warentest: How good are mutual fund ratings and can they be improved?

Sebastian Müller, Martin Weber

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

We test the abilities of the Stiftung Warentest fund rating system to predict future fund performance among German registered funds for six equity categories: Germany, Euro-Zone, Europe, North America, Pacific and World. Stiftung Warentest is a consumer protection agency and a major provider of fund ratings in Germany. Our empirical analysis documents predictive abilities of the rating system. The reason is that measures of past performance are positively related to future performance in several of these markets, even after controlling for momentum. Measures of fund activity (e.g., Active Share) are also helpful to predict performance, in particular to identify likely future losers. Hence, they should be taken into consideration by consumers when selecting a fund and rating agencies when revising current rating methodologies.

Original languageEnglish
Pages (from-to)207-235
Number of pages29
JournalEuropean Financial Management
Volume20
Issue number2
DOIs
StatePublished - Mar 2014
Externally publishedYes

Keywords

  • Active management
  • Mutual fund ratings
  • Mutual funds
  • Performance evaluation
  • Performance persistence

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