Abstract

http://ssrn.com/abstract=1356021
 
 

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Luck Versus Skill in the Cross Section of Mutual Fund Returns


Eugene F. Fama


University of Chicago - Finance

Kenneth R. French


Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

December 14, 2009

Tuck School of Business Working Paper No. 2009-56
Chicago Booth School of Business Research Paper
Journal of Finance, Forthcoming

Abstract:     
The aggregate portfolio of U.S. equity mutual funds is close to the market portfolio, but the high costs of active management show up intact as lower returns to investors. Bootstrap simulations suggest that few funds produce benchmark adjusted expected returns sufficient to cover their costs. If we add back the costs in expense ratios, there is evidence of inferior and superior performance (non-zero true alpha) in the extreme tails of the cross section of mutual fund alpha estimates.

Number of Pages in PDF File: 43

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Date posted: March 10, 2009 ; Last revised: February 8, 2010

Suggested Citation

Fama, Eugene F. and French, Kenneth R., Luck Versus Skill in the Cross Section of Mutual Fund Returns (December 14, 2009). Tuck School of Business Working Paper No. 2009-56 ; Chicago Booth School of Business Research Paper; Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1356021

Contact Information

Eugene F. Fama (Contact Author)
University of Chicago - Finance ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7282 (Phone)
773-702-9937 (Fax)
Kenneth R. French
Dartmouth College - Tuck School of Business ( email )
Hanover, NH 03755
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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