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Luck Versus Skill in the Cross Section of Mutual Fund ReturnsEugene F. FamaUniversity of Chicago - Booth School of Business (Finance Authors) Kenneth R. FrenchDartmouth 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 Accepted Paper SeriesDate posted: March 10, 2009 ; Last revised: February 8, 2010Suggested CitationContact Information
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