Capture Ratios: Seizing Market Gains, Avoiding Losses, and Attracting Investors’ Funds

We examine how mutual fund ability varies across up and down market conditions by exploring the Upside and Downside Capture Ratios. We find convincing evidence that Capture Ratios persist and successfully identify mutual funds that subsequently outperform in their respective market conditions. We show that mutual funds that possess the ability to both outperform in up markets and reduce losses in down markets significantly outperform over the...