Performance persistence in fixed interest funds: With an eye on the post-debt crisis period

•We test for performance persistence in a sample of bond mutual funds domiciled in Portugal, Italy, Greece and Spain (PIGS) for short, medium and long-term time horizons.•‘Cold hands’ is found in short as well as medium term periods with ‘hot hands’ being the second best most common outcome.•Alternative performance measurement techniques provide notably different performance ranking results.•An ex-post investment strategy focusing on persistent winners and avoiding persistent losers suggests the possibility of achieving above average returns.•Early European debt crisis evidence shows that investing in persistent winner funds may significantly boost overall returns.

We examine performance persistence in a sample of Portugal, Italy, Greece, and Spain (PIGS) government debt mutual funds. Performance persistence is measured for short-, medium-, and long-term periods using the conditional CAPM, the Sharpe ratio, and a modified version of the Sharpe ratio. “Cold hands” are found for both short- and medium-term periods, with non-parametric testing reinforcing our findings. While “hot hands” are proven a close second place, in the long-run performance persistence is gradually weakened. Ex-post tests, based on performance persistence results, suggest the possibility to achieve superior performance relative to the market average by sticking to winner and avoiding loser funds.