Can Mutual Fund 'Stars' Really Pick Stocks? New Evidence from a Bootstrap Analysis
Imperial College Business School; University of Oxford, Oxford-Man Institute of Quantitative Finance
Allan G. Timmermann
University of California, San Diego (UCSD) - Department of Economics; Centre for Economic Policy Research (CEPR)
University of Maryland - Robert H. Smith School of Business
Halbert L. White, Jr.
University of California, San Diego (UCSD) - Department of Economics
December 1, 2006
Journal of Finance, Vol. 61, No. 6, December 2006
We apply a new bootstrap statistical technique to examine the performance of the U.S. open-end, domestic-equity mutual fund industry over the 1975 to 2002 period. This bootstrap approach is necessary because the cross-section of mutual fund alphas has a complex, non-normal distribution - due to heterogeneous risk-taking by funds as well as non-normalities in individual fund alpha distributions. Our bootstrap approach reveals findings that differ from many past studies. Specifically, we find that a sizable minority of managers pick stocks well enough to more than cover their costs; moreover, the superior alphas of these managers persist.
Keywords: mutual funds, performance evaluation, bootstrap
JEL Classification: G11Accepted Paper Series
Date posted: December 19, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo8 in 0.375 seconds